South African motorists are bracing for another round of fuel price increases in February, as lower oil prices and a slightly stronger rand have not been enough to reverse the trend.
According to data from the Central Energy Fund (CEF) for the week ending January 24, petrol is expected to rise by 86 to 93 cents per litre, while diesel may increase by around R1.10 per litre. This follows a 12-cent per litre hike in January, which is likely to put upward pressure on inflation in the first quarter of 2025.
Despite the rand strengthening from over R19/$ to below R18.50/$ and oil prices dropping under $80 a barrel, these shifts take time to reflect in the fuel pricing model used by the Department of Petroleum and Mineral Resources.
Economists at Nedbank predict inflation will drift slightly higher in the coming months, averaging around 4% for 2025, with fuel and food prices contributing to the increase. They also warn that last year’s fuel price deflation is fading, and local fuel costs are likely to rise due to global oil price fluctuations and the rand’s volatility.
Global Market Impact
The rand’s weakness has been influenced by global uncertainty following Donald Trump’s return to the US presidency. While initial fears of aggressive trade tariffs have eased, concerns remain over Trump’s economic policies, particularly regarding China, Canada, and Mexico. Additionally, the US Federal Reserve’s cautious stance on interest rate cuts has tempered market expectations, leading to shifts in monetary policy outlooks globally, including in South Africa.
Meanwhile, global oil markets have reacted to Trump’s policies, with crude prices dropping from $85 to under $78 a barrel. The US president’s push for increased domestic oil production and pressure on OPEC to lower prices have contributed to this decline. However, oil prices remain higher than at the end of 2024 due to strong winter demand and ongoing geopolitical tensions, including US sanctions on Russia.
Despite these international developments, South African motorists are still set to face higher fuel costs in the coming month, adding to broader inflationary pressures.