R2.44 per litre of petrol relief for South African motorists

South African motorists are paying R2.44 less per litre of petrol in August following three consecutive months of price cuts. 

Successive cuts will bring the price of petrol and diesel to their lowest levels since January, providing much-needed relief to motorists. 

Cuts to the petrol price have largely resulted from the rand holding its ground versus the dollar and oil prices rising as the global economy slows. 

In total, the past three cuts to the price of fuel in South Africa have resulted in the below reductions for motorists at the pump –

• Petrol 93 – decrease of R2.44 per litre
• Petrol 95 – decrease of R2.38 per litre
• Diesel (0.05%) – decrease of R1.77 per litre 
• Diesel (0.005%) – decrease of R1.5 per litre

These are significant cuts in the price of fuel in South Africa, with decreases in the case of 93 octane petrol being above 10% over the past three months. 

While the formation of a Government of National Unity (GNU) has been met with widespread optimism in the financial markets and a stronger rand, the main driver of these decreases has been a softening oil price. 

Over the past three months, the price of a barrel of Brent Crude oil has come down from a high of $91.17 to $76.51 as of 6 August. 

This has been driven by poor economic data from the world’s two largest economies and oil consumers, the USA and China. 

An unexpected uptick in the US unemployment rate and revised down GDP growth have ignited fears that the world’s largest economy may be entering a recession. 

A weaker US economy will result in significantly less demand for oil, bringing the global price down. 

This has been coupled with China’s economy being expected to grow at a slower pace in 2025, dipping below 5%. 

As the world’s largest oil importer, this will add further downward pressure to oil prices. 

Despite this relief, South Africans are still paying more per litre of fuel than they were a year ago. 

This is largely due to increased tension in the Middle East, disrupting the supply of oil, and continued supply cuts from the Organisation of the Petroleum Exporting Countries (OPEC). 

OPEC members have agreed to limit their output of oil in an attempt to artificially keep prices for the commodity high. 

These output cuts have become steadily more stringent as oil prices have come down throughout 2024. 

A full-scale war in the Middle East between Israel and Iran may result in a sharp uptick in the price of oil, sending fuel prices higher in South Africa. 

If the price of oil continues to trend downwards or remains between the $75 to $80 per barrel range, then fuel prices are set to decline further. 

With over 85% of all goods in South Africa transported via road at some point, a sustained decline in the price of fuel will bring down inflation in the country. 

In particular, food inflation is highly sensitive to the price of fuel and has been a main driver of price increases in recent months. 

While petrol price increases have kept overall inflation high, inflation in other consumer goods has eased substantially.

Counterintuitively, inflation in other areas has been driven down by high fuel prices as they limit the disposable income of South Africans. This limits their spending on other goods and services, reducing the upward pressure on the prices of these goods. 

Thus, repeated fuel price cuts will give the Reserve Bank more room to cut interest rates in September as inflation moderates towards the midpoint of its target.