Mid-month data from the Central Energy Fund (CEF) indicates that petrol prices will fall by a small but appreciable margin this coming May.
Current projections show that petrol prices are set for a 15c per litre cut, while diesel could be dropping by over 38c per litre.
These anticipated adjustments are largely the result of lower average international oil prices for the period 18 March to 14 April 2025.
Fears of a global slowdown in economic activity following so-called “reciprocal tariffs” announced by United States President Donald Trump on 2 April resulted in a sell-off in the oil market.
The downward pressure on oil prices was further exacerbated by a bigger-than-anticipated production increase by the the Organization of Petroleum Exporting Countries, which is responsible for producing the bulk of the world’s oil.
As a result, oil traded for $73.63 per barrel on 28 February, rising to a high of $74.95 per barrel by 2 April, the day of Trump’s announcements.
Almost immediately after the tariffs were made public, oil fell off a proverbial cliff. It reached a low of $62.82 per barrel on 8 April, before recovering slightly to $64.88 by the 14th.
The lower average prices for the black gold led to an over-recovery of 50-53c per litre in domestic petrol prices, and 74-75c per litre in diesel prices.
Meanwhile, the rand/US dollar exchange rate performed less than favourable over the last two and a half weeks.
The divisive 2025 budget, also passed on 2 April, saw a rift formed in the Government of National Unity (GNU) between parties for and parties against the proposed VAT hike.
The political instability, coupled with economic headwinds from the tariffs and South Africa’s souring relationship with the United States, led to the rand hitting its lowest level against the dollar in recorded history, peaking at an ugly R19.9328/dollar on 9 April.
While it has somewhat recovered since then, now sitting at R18.8765/dollar, the damage was still done, as the underperfoming rand saw an under-recovery in local fuel prices of 35-37c per litre, depending on the grade.
Owing to these inputs, fuel prices in South Africa in May are expected to be adjusted as follows:
- Petrol 93 – Decrease of 15c a litre
- Petrol 95 – Decrease of 18c a litre
- Diesel 0.05% – Decrease of 38c a litre
- Diesel 0.005% – Decrease of 39c 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 are also subject to potential changes in the Slate Levy, taxes, transport and storage costs, or wholesale and retail margins.
Petrol price rollercoaster ahead
Experts have warned that South African fuel prices are in for a bumpy ride in the months ahead owing to the uncertainty created by the tariffs and our own political drama.
According to Investec, in a normal environment the weaker dollar we are currently seeing would have translated to a stronger rand, and we would’ve seen an exchange rate of around R17.50 per dollar.
However, it warned that should the GNU break up, or the Democratic Alliance be replaced by a more radical political party, the rand could drop to as low as R21 per dollar, which would wreak havoc on prices at the pumps.
Furthermore, it remains unclear how the tariffs will affect oil prices going forward.
Trump announced a 90-day pause on the implementation of the tariffs for many countries, with economies and private businesses therefore opting for a “wait-and-see” approach before they take action.
Certain players have made it clear that they will seek other buyers for their goods if the US goes forth with its aggressive trade instruments, which should contribute to stability in the oil sector.
However, any slowdown in global trade and economic activity will most likely lead to lower oil rates.
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