Energy

Petrol prices set for wild ride in 2025

Petrol prices are set for significant swings in 2025, with the stability brought to the market towards the end of 2024 unlikely to last as the incoming Trump administration promises to disrupt the status quo. 

Last year brought broad relief to South African motorists, with petrol prices declining R1.64 per litre from January to December. 

At the start of 2024, motorists paid R22.79 for a litre of 93 octane petrol. This did not last, with the price shooting up to R25.15 by May 2024. 

However, the positive election outcome brought good news for petrol prices, with the rand strengthening on the back of the formation of the Government of National Unity. 

A stronger rand and a lower oil price combined to reduce the price of 93 octane petrol to R20.73 per litre by October. Since then, the rand has steadily weakened, increasing the price to R21.15 per litre by December. 

The oil price stabilised towards the end of 2024 as it became clear the conflict in the Middle East was not disrupting exports of the commodity. 

Stability was also provided by the Organisation for Petroleum Exporting Countries (OPEC) maintaining its output quotas. 

However, FNB senior economist Koketso Mano said that the period of stability is unlikely to last throughout 2025. 

While OPEC has brought stability to the market, it has also delayed plans to increase the oil output of its members by three months and will not fully unwind production cuts until the end of 2026. 

This will not only put upward pressure on oil prices but also ensure the market remains tight, with no surplus supply to buffer against any external shocks. 

Mano expects global growth to continue slowing due to geopolitical tensions and weak Chinese demand, which should offset any pressure from supply cuts. 

This could be exacerbated by the Trump administration’s policy support for US industry, which may extend to oil producers.

“Such an event could see more oil supply, and given that OPEC may not want to lose more market share, added supply would further weigh on prices,” said Mano.

In the best-case scenario, petrol and diesel prices could be below R20 per litre come this time next year. 

Koketso Mano, senior economist at FNB Wealth and Investments

This best-case scenario relies heavily on the Trump administration’s stated policies being watered down before being implemented, as they would significantly impact the rand-dollar exchange rate. 

The rand has steadily weakened since the US election in November 2024, with many analysts and traders expecting a Trump administration to strengthen the dollar and weaken emerging market currencies. 

A more aggressive “America-first” policy than currently envisioned could mean stronger near-term growth in the US, more inflationary pressure, and less monetary policy space for cutting interest rates.

“In such a scenario, there would likely be further dollar strengthening, which would weigh on the rand-dollar exchange rate,” said Mano.

“We could also see an escalation in geopolitical tensions, which would worsen risk sentiment to the detriment of emerging market currencies.”

The coming year is also a period when policy stimulus in China is expected to start yielding results, which may boost the rand. 

However, stimulus in China has so far failed to have the desired result and, should further efforts fail, would weigh on commodity prices and South Africa’s terms of trade, weakening the rand. 

“Nevertheless, continued traction in the structural reform agenda in South Africa will be an important buffer for South African asset exposure to external risk events,” said Mano.

“All else equal, a weaker rand will contribute to higher imported inflation, including fuel, while rand strengthening will do the opposite.”

In the worst-case scenario, petrol and wholesale diesel prices could be above R25 per litre, closer to the peak experienced in 2022.

Mano expects diesel to experience wilder swings as the performance of the global economy influences it more than petrol as that drives demand for the fuel. 

With global growth being unpredictable in 2025, the price of diesel is set to fluctuate more wildly than petrol. 

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