The escalation of tensions between the US and Iran and the resulting instability around the Strait of Hormuz, a major global supply chokepoint, has revealed that supply chains are only as strong as their weakest geopolitical link.
With 20% of the global oil supply amounting to 20-million barrels a day (bbl/d) of crude oil and crude-equivalent products passing through the Strait before the war (5-million bbl/d of that being refined petroleum), the world has been severely affected.
The crisis has become a direct stress test for South Africa’s petroleum sector, which has become structurally vulnerable over time. A number of structural blind spots have been revealed in the downstream industry.
South Africa is a net importer of refined petroleum products, and our vulnerability becomes clear during geopolitical disruptions such as the Iran-US war. The department of mineral & petroleum resources has sought to reassure the market that South Africa’s crude oil imports are diversified across African producers such as Angola, Nigeria and Ghana.
However, it fails to recognise that South Africa is not primarily constrained by crude oil supply but by its growing dependence on imported refined petroleum products. The country’s current refining capacity of 358,000 bbl/d does not meet South Africa’s demand for over 600,000 bbl/d to fuel the economy.
Concentration risk
According to market reports by the industry body, the Fuels Industry Association of South Africa, the country consumes more than 24-billion litres of petroleum products annually, 18-billion litres of that being imports of mainly diesel (14.8-billion litres) and petrol (4-billion litres).
About 41% of diesel imports come from Bahrain, Kuwait and Saudi Arabia, and 46% of petrol imports come from Saudi Arabia and the United Arab Emirates. In times of stability this concentration may appear commercially and logistically efficient. In times of disruption, it becomes a systemic risk.
Refining capacity collapse
Over the past decade South Africa’s refining base has steadily declined due to a combination of operational challenges, underinvestment and regulatory pressures.
From March to mid-April, the Glencore-owned Astron Energy refinery was shut down for operational maintenance, reducing the national refining capacity from about 358,000 bbl/d to about 258,000 bbl/d, which further increased South Africa’s reliance on imported fuel products to meet the supply gap.
Policy failure
Another blind spot was the Clean Fuels 2 framework gazetted in September 2021, with the initial implementation deadline set for September 2023, which aimed to transition South Africa to Euro V fuel standards. However, the deadline has since been extended to July 2027.
While the environmental objective is sound, the policy failed to adequately account for the capital intensity and short timelines required to upgrade existing refineries, which accelerated the closure of legacy refining infrastructure.
Without government intervention or incentives, it was unsustainable for refiners to continue investing in upgrading refineries in a short time, ironically increasing reliance on imports of the very cleaner fuels the policy seeks to promote.
Strategic fuel stocks policy
The lack of implementation of the strategic fuel stocks policy is another overlooked blind spot. The policy framework was gazetted in 2012 for public review and not only focused on prioritising crude oil but also introduced refined petroleum products as strategic reserves required in the country, while also incentivising oil majors and importers to hold refined products as reserves to act as buffers during national emergency.
However, to date, it has not been implemented to ensure that South Africa has enough refined products to meet domestic demand and complement our refining capacity in times of crisis. Even the current crude oil reserves do not meet their intended quota, with storage tanks at 8-million bbl when the target is 45-million bbl.
Trading off energy security for fiscal flexibility
The fifth blind spot involves the National Treasury, where the finance minister has given temporary relief from the general fuel levy to the tune of R3/l on a month-to-month basis while assessing and monitoring the situation in the Middle East. The Treasury previously provided relief through a temporary reduction of the general fuel levy by R1.50/l during the 2022 Russia-Ukraine war (April–May initially, then partially extended).
However, the Treasury is dependent on this revenue collection mechanism to meet its fiscal revenue targets, so this intervention was not fiscally neutral. As reported at the time by Reuters, the government indicated that the revenue foregone would be recouped through the sale of crude oil from South Africa’s strategic reserves, an approach that is counterintuitive given the already declining and insufficient levels of those reserves.
In periods of disruption, petroleum markets do not operate on goodwill, but on supply and demand. Access to supply is determined by who can secure cargoes quickly, absorb price volatility and offer competitive terms.
Even efforts to diversify supply — such as sourcing from newer refining hubs such as West Africa, through the Dangote refinery — do not insulate South Africa from global pricing dynamics. Without sufficient domestic buffers in the form of strategic reserves, the country remains fully exposed to international price formation.
The basic fuel price (BFP), which reflects the landed cost of fuel in South Africa, including international product cost, freight, insurance and exchange rates, becomes highly volatile under these conditions before local taxes and additional distribution costs are even added.
With global supply at risk and more than 400 vessels carrying petroleum products stuck in the Persian Gulf, the prices of refined petroleum and crude oil have increased significantly due to limited supply.
With vessels delayed for almost four weeks and freight rates rising, cargoes are redirected to the highest bidders. Recent export restrictions by major refining economies such as China illustrate how quickly global supply can be reprioritised toward domestic markets.
Even efforts to diversify supply — such as sourcing from newer refining hubs such as West Africa, through the Dangote refinery — do not insulate South Africa from global pricing dynamics. Without sufficient domestic buffers in the form of strategic reserves, the country remains fully exposed to international price formation.
This exposure could have been partially mitigated through a well-developed strategy of strategic reserves of refined petroleum products. Such reserves would allow the state to inject supply into the domestic market during periods of global disruption, reducing reliance on high-priced spot imports.
Countries such as Japan have actively released significant volumes from their strategic reserves — amounting to more than 45 days of supply in March — with additional releases under consideration to stabilise domestic markets and mitigate global price shocks.
The consequences of these structural weaknesses are already beginning to materialise. As supply chains adjust and markets price in prolonged disruption, South Africa is likely to face sustained fuel price increases. These increases will not only affect motorists but also cascade through the broader economy — raising costs for logistics, miners, farmers, manufacturers and ultimately consumers.
The lesson from this moment is clear. South Africa’s fuel security cannot be treated as a short-term operational issue; it is a long-term structural challenge that requires co-ordinated policy, investment and market alignment.
Rebuilding refining capacity where feasible, diversifying import exposure, implementing a functional strategic stockholding system and aligning regulatory frameworks with industry realities are no longer optional — they are imperative.
In an increasingly volatile global energy landscape, resilience will not be determined by access to supply alone but by the ability to anticipate disruption, absorb shocks and respond with strategic flexibility. South Africa must act accordingly.
• Chigwedere is CEO of Chigwedere Petroleum & Energy Corporation.
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