South Africans should prepare their wallets for elevated fuel prices over the course of 2025.
Despite receding global oil prices which traditionally translates into lower prices at the pumps, unfavourable economic headwinds are expected to reverse much of the gains we’ve seen in recent times.
Following the swearing in of the new Government of National Unity in 2024, motorists enjoyed five consecutive months of declining fuel prices largely thanks to an improving rand/US dollar exchange rate.
In total, the cutting cycle slashed over R4.40 per litre from the price of petrol between June and October 2024, and over R4.00 per litre from diesel between April and October.
However, since Donald Trump’s victory in the US elections in November 2024, many investors have dropped emerging-market currencies in favour of the dollar.
The rand subsequently started depreciating against the greenback while global oil prices simultaneously started increasing, driven by higher seasonal demand caused by a colder-than-usual winter in the Northern Hemisphere, as per Nedbank economists.
These elements reversed the downtrend in domestic fuel prices we saw in the months prior, with November through January all seeing a rise in fuel prices.
Consequently, Nedbank expects the increasing propellant costs to impact inflation over the coming months as fuel rates directly impact the prices of goods we see on shop shelves.
Inflation registered 3.0% in December, however, Nedbank forecasts that it will drift upwards in the months ahead towards 4% by the end of 2025.
“Mild upward pressure will likely come from food and fuel prices, as they start to climb off a much lower base,” said the institution.
“Rising global food prices and a weaker rand are expected to offset the downward pressure exerted by higher domestic food production, which should benefit from good rains over the past two months.”
As such, fuel price deflation will also gradually fade and reverse.
“While global oil prices are forecast to decline, a low base and a weaker rand will slowly lift local fuel prices to higher ground,” said Nedbank.
February outlook
Data from the Central Energy Fund (CEF) points to substantial fuel price hikes in the first week of February.
Mid-month data from the entity, covering the period 27 December 2024 to 27 January 2025, indicates that volatile oil prices combined with a depreciating rand are likely to result in higher propellant costs next month.
The price of Brent Crude oil closed at $74.17 per barrel on 27 December before rising to a high of $82.03 per barrel by 15 January and settling back down to $77.08 per barrel by the 27th.
The fluctuations contributed to an under-recovery in domestic fuel prices of 47-54c per litre for petrol and 64-69c per litre for diesel.
Meanwhile, the rand swapped hands with the greenback at a rate of R18.80 per dollar on 27 December and stayed relatively flat for the month, ending up at R18.78 per dollar on 27 January.
However, this is substantially higher than the sub-R18.10 per dollar average of the month before, leading to a further under-recovery of 37-41c per litre across all fuel types, depending on the grade.
Based on these inputs, fuel prices in South Africa in February are anticipated to be adjusted as follows:
- Petrol 93 – Increase of 91c a litre
- Petrol 95 – Increase of 84c a litre
- Diesel 0.05% – Increase of R1.09 a litre
- Diesel 0.005% – Increase of R1.05 a litre
It should be noted that these predictions are not the official changes that will be made by the Department of Mineral and Petroleum Resources next month.
The final changes could be higher or lower as they also take into account any potential changes in the Slate Levy, taxes, transport and storage costs, or wholesale and retail margins.
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