A surge in international crude oil prices in June and early July has pushed local fuel costs higher, adding strain to households and businesses already grappling with rising municipal tariffs.
But economists say the spike could be temporary, with easing geopolitical tensions and a stronger rand both likely to bring relief in the coming weeks.
“The fuel price increases are entirely about the higher international oil prices on the back of the tensions in the Middle East,” said Miyelani Maluleke, head of SA macroeconomics research at Absa Corporate and Investment Banking.
According to FNB agricultural economist Paul Makube, higher fuel prices are “unwelcome news” for the agriculture sector as fuel “constitutes a significant portion of distribution costs for commodities such as fresh produce, livestock and grain — both locally and for export markets”.
He added that fuel accounts for about 10% of the variable costs associated with grain and oilseed production.
“The oil price has seen a volatile month (June), rising from $62.8 a barrel to $77.2 a barrel, averaging $69.7 a barrel for June after April’s $64.0 a barrel,” said Investec chief economist Annabel Bishop.
But prices have since retreated to below $70. On Friday, Brent crude oil sat at $68.21 a barrel.
Data from the department of mineral & petroleum resources show that 93 ULP increased by 55c a litre and 95 ULP & LRP by 52c a litre. Diesel prices rose by 82c and 84c a litre for the 0.05% and 0.005% sulphur grades, respectively.
Maluleke noted that the timing of the fuel hikes compounds the financial burden on consumers, with “steep municipal tariffs hikes for electricity, water and other services, which kicked in from the start of July,” further squeezing disposable incomes.
Makube warned that higher fuel prices could also complicate the consumer inflation outlook, which has remained within the SA Reserve Bank’s target range of 3%-6% for some time.
The good news is that this fuel price increase may prove short-lived.
According to Bishop, oil prices could fall further “on the implementation of a ceasefire between Israel and Hamas,
de-escalating tensions in the area”.
There is also continued support from a stronger rand as the
90-day tariff pause approaches on July 9. At midday on Friday, the rand was trading at R17.59 to the US dollar.
“If there isn’t another negative shock, we should see some fuel price relief in early August,” Maluleke said.
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