South African motorists are facing the prospect of a sharp increase in fuel prices next month, with the latest data showing that recent improvements in petrol and diesel price recoveries have largely been wiped out.
Data from the Central Energy Fund (CEF) indicates that fuel price under-recoveries have climbed back towards levels recorded at the beginning of August, pointing to substantial increases when September’s prices are finalised.
Petrol began August with an under-recovery of about R1 per litre. By the middle of the month, this had fallen to approximately 65 cents per litre. However, the figure has since risen again to around 94 cents per litre.
Diesel has followed a similar trend. After starting the month with an under-recovery of about R5 per litre, the figure had dropped to roughly R2.80 by mid-August. It has now climbed back to around R3 per litre.
At the end of the third week of August, the latest estimated price adjustments were:
- Petrol 93: increase of 83 cents per litre
- Petrol 95: increase of 94 cents per litre
- Diesel 0.05%: increase of R2.87 per litre
- Diesel 0.005%: increase of R3.07 per litre
- Illuminating paraffin: increase of R2.24 per litre
The deterioration in fuel price recoveries has largely been driven by renewed volatility in international oil markets linked to the ongoing conflict between the United States and Iran.
Global oil prices had been trending below $70 a barrel as shipping activity through the Strait of Hormuz began to recover. However, renewed hostilities and the subsequent closure of the strategically important shipping route pushed oil prices sharply higher.
Although some vessels have continued to navigate the Strait, helping to limit the immediate impact on global markets, oil prices have remained elevated, trading largely between $80 and $90 a barrel before recently climbing to around $94.
Further uncertainty has been fuelled by expectations that the Trump administration could introduce additional economic measures targeting Iran.
Bloomberg reports that the US administration is expected to provide details next week of an “economic D-day” initiative aimed at putting further pressure on Tehran. The measures could also affect countries that continue trading with Iran, including China, one of the largest buyers of Iranian oil.
Concerns over a potential escalation in economic tensions between Washington and Beijing have added to uncertainty in international markets.
South Africa has received some relief from a stronger rand, which has helped cushion the impact of higher international oil prices.
The rand is trading at around R16.05 against the US dollar and has remained relatively resilient despite the volatility caused by the conflict.
The currency received additional support this week following the release of minutes from the US Federal Reserve’s Federal Open Market Committee meeting. Concerns about inflation and economic risks have influenced expectations around US interest rates, putting pressure on the dollar and supporting emerging-market currencies such as the rand.
The local currency has also benefited from stronger domestic economic conditions and higher commodity prices, with gold continuing to trade at elevated levels.
Despite these positive factors, the strength of the rand has not been enough to offset the impact of rising international oil prices.
The latest CEF figures therefore point to a difficult month ahead for South African motorists, with petrol and diesel prices likely to rise significantly when the September adjustments are announced.