South African motorists could face a diesel price increase in August as rising global oil prices continue to erode earlier fuel price over-recoveries, according to the latest data from the Central Energy Fund (CEF).
Figures for the end of the third week of July show that the fuel price outlook has deteriorated, with diesel 0.05% (500ppm) now moving into under-recovery territory, signalling the possibility of a price hike next month.
Diesel 0.005% (50ppm), which is more commonly used by passenger vehicles and newer diesel models, is still reflecting a small over-recovery, although the margin has narrowed considerably.
Petrol prices remain on track for a decrease, but the expected cuts have also been shrinking steadily throughout the month.
The latest fuel price outlook indicates:
- Petrol 93: Decrease of R1.07 per litre
- Petrol 95: Decrease of R1.03 per litre
- Diesel 0.05% (wholesale): Increase of 1 cent per litre
- Diesel 0.005% (wholesale): Decrease of 24 cents per litre
- Illuminating paraffin: Decrease of 22 cents per litre
The latest figures represent a significant shift from the beginning of July, when petrol and diesel were both showing substantially larger over-recoveries.
Analysts had warned that the improving outlook would likely reverse as international oil prices climbed.
Chief Investment Strategist at Symmetry, Izak Odendaal, previously noted that the strong over-recoveries were being eroded by daily under-recoveries of around R3.71 per litre, largely driven by rising crude oil prices.
Brent crude has climbed to around $85 a barrel following renewed conflict between the United States and Iran, placing upward pressure on global fuel prices.
Investec Chief Economist Annabel Bishop has also observed that petrol over-recoveries have fallen sharply, declining from around R3 per litre earlier in the month to roughly R1 per litre as geopolitical tensions intensified.
According to Bloomberg analysts, the impact of the Middle East conflict has been compounded by supply disruptions in Europe, where attacks on Russian refineries by Ukraine and Moscow's subsequent ban on diesel exports have tightened fuel markets.
The combination of reduced supply and geopolitical uncertainty has increased the risk of higher fuel prices globally.
Analysts say markets remain hopeful that diplomatic efforts between the United States and Iran could eventually ease tensions, but concerns have shifted toward whether oil exports can continue to move freely through key shipping routes.
For South Africa, continued volatility means fuel prices could weaken further before month-end, increasing the likelihood of diesel price hikes and reducing the size of any petrol price cut.
Higher diesel prices would have broader economic consequences beyond motorists, as diesel is widely used in freight transport, agriculture, manufacturing and other industries.
Rising fuel costs typically increase operating expenses across supply chains, with businesses often passing those costs on to consumers through higher prices for goods and services.
Even if petrol prices are reduced in August, motorists are unlikely to see a return to pre-conflict fuel prices anytime soon.
Current pump prices remain about R6 per litre higher for petrol and more than R7 per litre higher for diesel than they were before hostilities in the Middle East escalated, with the latest projected adjustments expected to make only a modest difference.