News24 | Petrol set to smash R30/litre next week; diesel may also hit record high

South African fuel prices are largely dependent on global oil prices and the rand-dollar exchange rate, as oil is priced in dollars.

Dwayne Senior/Bloomberg via Getty Images

• The petrol price is expected to rise by more than R3/litre next week, which could push Gauteng prices above R30/litre.
• Diesel is also heading for record highs, driven by global refinery shortages, the US-Iran war, and threats of a US diesel export ban.
• The fuel price shock may raise the likelihood of an interest rate hike in November.
• For more financial news, visit News24 Business.

South Africans may face record-high fuel prices next week, with petrol in Gauteng perhaps costing more than R30/litre for the first time.

The latest data from the Central Energy Fund shows a projected increase of R3.29/litre for 95 unleaded petrol and R3.09 for 93 unleaded.

The wholesale price of diesel (0.05% sulphur content) is due for a hike of around R2.80/litre.

While the final hikes, which will take effect next Wednesday, still need to be confirmed, the current estimates mean that Gauteng 95 petrol may increase to a new record of around R30.21. The coastal price may rise to R29.34.

Wholesale diesel (0.05% sulphur content) in Gauteng may reach R31.91, and R31.04 on the coast, also reaching new record-high levels.

South African fuel prices largely depend on global oil prices and the rand-dollar exchange rate, as oil is priced in dollars.

Oil prices have been climbing, with Brent crude currently trading above $100 a barrel. Brent has climbed 70% so far this year.

The continued US-Iran war, now in its eighth month, has throttled oil supplies, with reports that the US is sending an additional 10 000 troops ‌and another aircraft carrier to the Middle East adding to market nervousness.

On Thursday, China suspended its fuel exports to preserve local stocks, adding to shortage concerns.

Diesel is already in short supply due to a shortage of diesel refinery capacity globally, which has been compounded by the Iran war and Ukrainian drone strikes on Russian refineries.

Prices have ramped even further as US President Donald Trump threatens to ban US exports of diesel. The US is the world’s largest diesel exporter, and keeping the fuel onshore will flood the market and dramatically lower local diesel prices.

READ | ‘One-two punch’: SA hit by global diesel crunch

South Africa has been a major importer of US diesel in recent months due to supply disruptions in the Middle East, and is dependent on imported refined fuels following the large-scale closure of local refineries.

READ | SA diesel imports from US hit record 5 million barrels since Iran war

A weakening rand has added to upward pressure on fuel prices. The local currency has lost more than 3% of its value against the dollar over the past month amid expectations of more US interest rate hikes.

A US interest rate hike makes dollar-based investments more attractive, prompting investors to pull money out of emerging markets like South Africa, which weakens demand for the rand and drives its value down.

A global bond market rout, along with the continued turmoil in the Middle East, has also added to investors' willingness to invest in riskier assets, which also channels money away from emerging markets.

The large fuel price hike next week may also increase the chance of an interest rate hike in November.

Higher fuel prices increase production costs at farm and factory level, as well as the cost of transporting goods to markets, factories, wholesalers and retailers. These costs are passed on to consumers, which push up inflation and force the Reserve Bank to take rate action.