South Africa’s R17 per litre petrol price pain

South Africa’s petrol price has risen by over R17 per litre in the past two decades as the rand has steadily weakened versus the dollar, and the oil price has trended upwards. 

In 2004, a litre of 95-octane petrol was R4, while diesel was marginally lower at R3.29 per litre. Currently, 95 octane petrol sits at R21.62 per litre in Gauteng, with the price increasing by around a rand every year. 

This is largely due to the rand’s depreciation in value over the past two decades, with the currency declining by an average of around 5% per year versus the dollar. 

A weaker rand makes importing goods such as oil and finished petroleum products much more expensive, with the costs passed on to the consumer at the pump. 

An analysis by the Bureau for Economic Research (BER) pointed to South Africa’s relatively high inflation rate compared to its more developed peers as the reason for the rand’s weakness. 

In the long run, an elevated inflation rate compared to other countries requires a degree of currency depreciation to ensure South Africa’s exports remain globally competitive. 

As inflation increases the costs of producing exports locally, they become less attractive than cheaper alternatives. 

To counteract this, a currency is weakened to make the exports relatively cheaper in dollar terms and, thus, more competitive globally. 

The BER also pointed to South Africa’s historic current account deficit – the country imports more than it exports – as another major reason for the rand’s weakness. 

Consistently running a current account deficit results in money flowing out of the country and less demand for the local currency, weakening it. 

A major driver of this has been the declining output from South Africa’s mining sector, traditionally the country’s biggest exporter.

A weaker rand compounds this problem by increasing the cost of imports, causing inflation and eroding South Africa’s export competitiveness.

The rand’s steady weakening, despite brief periods of strengthening, can be seen in the graph below. 

The role of oil prices

The other major factor determining petrol prices in South Africa is the price of oil, which rose sharply in the late 2000s and has remained relatively flat since then. 

Despite a push to reduce the global economy’s reliance on oil, demand for the commodity has remained strong in the past two decades. 

A spike in demand, and subsequently price, was driven in the 2000s by the rise of the Chinese economy, which is now the world’s largest importer. 

Several wars in the Middle East also disrupted supply from major producers, pushing the price up to $100 per barrel. 

Since 2010, the oil price has experienced wild swings, dropping as low as $40 per barrel before bouncing back to $100 per barrel. 

The good news for South African motorists is that the oil price is coming under immense downward pressure from a slowing global economy and additional supply coming online. 

Investors are worried that the global economy may enter a recession due to United States President Donald Trump’s implementation of tariffs. 

However, oil traders are particularly concerned that demand from China has peaked, with the world’s largest importer asking its refineries to reduce their output. 

Furthermore, members of the Organisation for Petroleum Exporting Countries have voted to relax their production cuts to regain market share. 

The organisation’s eight members subject to voluntary extra output cuts will begin increasing production in April and are expected to add 2.2 million barrels a day of supply. This relaxation was only anticipated to come into effect in late 2025 and early 2026.

The graph below shows the steady rise in the price of 95-octane petrol in South Africa, courtesy of Stanlib chief economist Kevin Lings.