Petrol price hikes spell trouble for South Africa

Recent petrol price hikes are set to raise the prices of basic goods and services across South Africa, eating into household budgets and limiting consumer spending.

Data from the Central Energy Fund shows petrol prices may rise by as much as R1.15 per litre for petrol and between R1.14 and R1.28 per litre for diesel.

These increases will come on the back of a significant increase in fuel prices in February. Petrol prices increased by 75 cents per litre across both grades, and the price of diesel rose by between 70 cents and 73 cents per litre.

The price of oil rebounded at the beginning of February, largely due to geopolitical tension and the conflict in the Middle East. It has disrupted ocean freight, including oil exports. 

The effect of the rise in the price of oil has been compounded by the weakening of the rand throughout February. 

This has resulted in the Central Energy Fund data indicating the potential increases below:

• Petrol 93 – increase of 113 cents per litre
• Petrol 95 – increase of 117 cents per litre
• Diesel 0.05% (wholesale) – increase of 112 cents per litre
• Diesel 0.005% (wholesale) – increase of 127 cents per litre

Before the increases in February and those looming in March, petrol prices have risen 54% in the past two years. 

This has resulted in spending on fuel taking up an increasing portion of South Africans’ total spending, limiting their ability to purchase other goods and services. 

Spending on petrol rose to over 8% as a share of total spending by South Africans since the end of the pandemic-era lockdowns. 

Road Freight Association (RFA) CEO Gavin Kelly said that, given the high fuel cost, logistics companies would have to increase their pricing to cover the rising costs. 

This will feed into the entire value chain as fuel is a universal input into the economy, potentially raising the cost base of all goods and services. 

“Any gains achieved in mid-2023 are steadily being eroded,” he said. “Whilst we have seen fuels coming off the huge highs in 2022 and 2023, prices are not where the local economy would like them to be.”

Kelly said roughly 85% of all goods moved through and around the country are transported via road at some point. 

Thus, rising fuel prices will result in increased prices for consumers as the cost of transporting goods rises.

“Fuel is fast crossing the 50% mark in daily transport operating costs, which remains a high operational input cost for any company or business that requires goods to be transported.”

“That cost will – in most cases – be borne by the consumer who will continue to feel inflationary price pressure in the short- to medium-term.”

The freight CEO said that, in the short term, general transport costs will rise – from food to fuel, clothing, electronic goods and everything in between.

“There will be the inevitable price escalations – some immediately, but more so, a domino effect will ensue, the next in a long line of such domino effects that we have seen too often in the last few months.”