Motorists could be facing petrol price increases that result in a litre of petrol costing R32 before the end of 2026.
A combination of possible rand depreciation and crude oil prices threaten to deliver a severe cost-of-living shock to households already under pressure, according to economists with consulting and research firm EY-Parthenon
The firm’s structural model, which tracks the relationship between fuel prices, exchange rate movements and global crude benchmarks, projects that petrol, currently priced at about R20/l, could reach that high based on a possible petrol price increase of between R6.87 and R7.88.
The research note, dated March 29 — before the announcement of the April fuel price adjustment — comes as the conflict between US and Iran continues to increase domestic fuel costs, which directly affects food prices, transport costs and manufacturing input.
The note was also released before the adjustment of the fuel levy by the Treasury.
The South African economy is affected almost immediately by supply disruptions in the Middle East because the country now refines less than 35% of the fuel it consumes domestically, after the 2022 closure of the Sapref refinery in Durban.
This means the basic fuel price — the government’s formula for setting what refiners and importers can charge at the wholesale level — is almost entirely exposed to the present international crude price and the rand-dollar exchange rate.
Unlike petrol, diesel prices are not regulated by the government. Fuel companies set their own rates at the pump based on what diesel costs them to source internationally.
Diesel worse off
Diesel, which powers the country’s freight, mining and agriculture sectors, faces an even steeper trajectory, according to the report. From a current base of about R18/l, EY Parthenon estimates the near-term increase at between R9.82/l and R11.39/l.
In the most severe scenario, diesel could approach R35/l by early 2027.
“Peak risks are materially higher for diesel than petrol, with modelled highs near R35/l in the most severe scenario by the start of 2027, consistent with diesel’s heavier exposure through freight, logistics and backup generation channels,” the note reads. Those sectors have limited ability to absorb or substitute away from oil-based inputs on short notice.
With 10%-15% of the country’s labour force able to work remotely, location-dependent employment dominates, and oil demand is deeply embedded in diesel-intensive industries, the firm argues in the note.
Fiscal space compounds the challenge, as the government has limited budget headroom, constraining the ability to deploy broad price interventions without destabilising debt dynamics.
“These trade-offs are further sharpened by limited fiscal space, which constrains the ability of many African governments, including South Africa, to sustain broad price interventions without compromising debt and budget stability,” the note reads.
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