South African petrol prices are in for a wild ride over the coming months.
Unpredictable tariffs from the United States (US) coupled with fluctuating global oil prices are expected to create much froth in the fuel market as the aftermath plays out.
Simultaneously, with rifts deepening in the Government of National Unity (GNU), few are able to predict where things will go from here.
Blind corners ahead
The two biggest determinants of local fuel prices are international petroleum rates which are impacted by oil prices and the rand/US dollar exchange.
Oil prices have been the biggest saviour at the pumps in recent times.
The black gold hit a four-year low of under $63 per barrel after US president Donald Trump sparked a global tariff war on 2 April 2025 by announcing so-called reciprocal tariffs on most countries around the world.
As per Bloomberg, the tariffs raised concerns over a potential global slowdown or recession that would jeopardize energy demand, resulting in a sell-off in the market.
Simultaneously, the Organization of Petroleum Exporting Countries (OPEC+) increased oil output by a bigger-than-anticipated margin, adding further downward pressure on prices.
While oil rates have since found some support, traders are still standing at the ready for more geo-political tiffs that could bring uncertainty.
As of 10 April, the lower average international petroleum prices contributed to an over-recovery of 43-47c per litre in local petrol costs, and 70-71c per litre in diesel costs, according to figures published by the Central Energy Fund.
Away from oil prices, the tariffs had a significant impact on currencies, with emerging markets such as South Africa being particularly affected as money flows back into less risky assets.
The dollar wasn’t immune to its president’s whims, though, as it, too, suffered.
Unfortunately, we here on the tip of Africa haven’t seen much benefit from the dollar’s devaluation due to our own political drama.
The approval of the divisive 2025 budget caused a big divide between the two major parties of the GNU, the ANC and DA.
The DA voted against the contentious budget, whereas the ANC went outside the GNU for support to eventually get the budget passed, with both parties highly displeased by the other’s actions.
While negotiations and discussions continue behind closed doors, the future of the GNU appears to be hanging in the balance.
This is creating uncertainty for investors and keeping the rand at elevated levels.
According to Investec, in a normal environment the weaker dollar would have translated to a stronger rand, and we would likely have seen an exchange rate of around R17.50 per dollar.
Much to the disappointment of the country, the rand instead hits it lowest level against the greenback in recorded history, peaking at an ugly R19.9328 per dollar on 9 April.
Investec added that, should the DA exit the GNU either by choice or force, and be replaced by more unpredictable parties, the rand could drop to as low as R21 per dollar.
The current rand weakness has effectively nullified much of the benefits of lower oil prices, contributing to an under-recovery in domestic fuel costs of 33-35c per litre in the period 28 March to 10 April 2025.
Should the worst-case scenario come to fruition, “a weaker rand will raise fuel prices and the cost of living,” warned Investec.
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