Energy

South Africa’s petrol price goes from bad to worse

Petrol price

South African motorists are set to feel the pain next month, with both grades of petrol set to rise by around 90 cents per litre and diesel to rise by over R1 per litre. 

While the rand has weakened slightly over the past month, much of this has been driven by a sharp rise in the global price of oil. 

This is mainly unexpected considering the conflict in the Middle East ending and Donald Trump beginning his second term as US President, during which he plans to increase oil supply from the world’s largest producer. 

However, economists have been at pains to point out that the conflict in the Middle East has barely impacted oil exports from the region. 

Furthermore, the Organisation for Petroleum Exporting Countries (OPEC) decided towards the end of 2024 to delay its plans to increase the oil output of its members. It will not fully unwind production cuts until the end of 2026. 

South Africa’s Central Energy Fund (CEF) tracks the global oil price and exchange rate fluctuations to forecast the expected changes to the price of fuel in South Africa. 

Its data indicates the below changes for February –

  • Petrol 93 – increase of 95 cents per litre
  • Petrol 95 – increase of 89 cents per litre
  • Diesel 0.05% – increase of 114 cents per litre
  • Diesel 0.005% – increase of 110 cents per litre

This reflects the increased uncertainty brought about by the potential implications of a second Donald Trump presidency.

With the balance between the supply of oil and demand for the commodity finely balanced due to OPEC’s production cuts, any external shock will likely have a significant price impact. 

Trump’s second term also comes at a time when sanctions placed on Russia are beginning to bite, with oil exports from the country seeing their biggest drop last week since November. 

Bloomberg’s vessel-tracking data also showed that Russia’s exports stayed around a 16-month low and below three million barrels a day. 

Lower supply from Russia has been compounded by an expected increase in demand from China on the back of fresh stimulus from its government. 

CEO of Saudi Aramco, the world’s largest oil company, Amin Nasser, said it expects good demand from China throughout 2025. 

China, alongside India, will make up around 40% of the rise in global oil consumption, and Nasser expects the appetite for the commodity from these two countries to increase year-on-year. 

A weaker rand adds to the upward pressure on the price of petrol and diesel in South Africa as it makes importing fuel more expensive. 

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 FNB senior economist Koketso Mano.

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

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