Introduction
Recently, new data suggests fuel price fluctuations in South Africa due to oil price extrinsic factors (global), currency movement (intrinsic to South Africa) and other local economic determinants. Changes (no matter how marginal) to gasoline and diesel fuels can disproportionately affect everyday expenses for both individuals and businesses alike, depending on their volume of use.
Latest Fuel Prices in South Africa
March 2020 new data showed that the most recent fuel price increase occurred earlier this month. Gasoline (i.e., petrol) prices jumped approximately 20 cents per litre, while diesel fuel experienced a larger increase of 62–65 cents per litre. Latest fuel prices at the time of the announcement range from approximately: $R20.19 for 93-grade gasoline to $R20.30 for 95-grade gasoline. Note that these will differ slightly by geographical region (i.e., coastal vs. inland).
Why Fuel Prices Are Changing Today
1. Rising Global Oil Prices
The main cause of fuel price increases is the continuous increase in the global price of crude oil. The geopolitical instability, particularly in the Middle East, has contributed to crude oil prices exceeding $100 per barrel, leading to increased global fuel prices. As South Africa is an importer of most of its fuel, the change in price on the international market has a direct correlation with the local price of fuel.
2. Weakening Rand
The strength or weakness of the South African Rand against the US Dollar has a large effect on the price of fuel. A weak Rand results in the cost of imported fuel increasing, which subsequently leads to an increase in the price of petrol and diesel.
3. Supply and Demand Pressure
The demand for fuel continues to be strong because of increased economic activity. In addition, South Africa’s limited refining capacity results in the country having to rely on imported fuel, which puts additional pressure on fuel pricing.
4. Under-Recovery in Fuel Prices
Reports are showing that current fuel prices are under-recovering, meaning that the actual market price of fuel is higher than the retail price and will force an increase in the price of fuel in the future to compensate for the difference.
Expected Fuel Price Trend
Analysts expect to see significant increases in the price of South African fuel from now until the end of the year. They estimate that the price of petrol will see an increase of between R2.60 and R3.10 per litre; diesel will have a larger increase than petrol.
Impact on Consumers
Rising fuel prices will hurt not only the transportation industry – it’s raising what people can afford, which will put many people in a greater sense of urgency with regard to inflation rates in both goods and services.
- The result is an everyday consumer will be forced to:
- Pay more to travel
- Pay more for groceries
- Feel overall pressure on their monthly budgets
What This Means for the Economy
One of the main components of overall economic activity is the price of fuel. As the price of fuel increases, the cost of doing business increases, and consequently, the rate of growth in the economy decreases. Higher commodity prices can also benefit South Africa, so the Republic may have an opportunity to increase its income and help to support its economic development.
Final Thoughts
In South Africa, current fuel prices are being impacted by global oil market price volatility, currency fluctuations, and local supply constraints. According to the latest update, fuel prices are on an upward trend; however, continued upward price pressure is expected. Nonetheless, consumers can offset the effects of rising prices by becoming educated about global oil market activity and developing a comprehensive strategy for reducing personal fuel consumption.
