Gavin Kelly | CEO | Road Freight Association | mail me |
Global fuel market dynamics play an enormous role in determining fuel prices. Global oil price volatility strongly influences these dynamics. Supply and demand remain highly relevant. They influence what the global market will pay for a barrel of oil. They also shape perceptions of shortages. In turn, these perceptions can trigger buying sprees that push prices higher.
Secondly, oil is primarily traded in US dollars. Therefore, the value of the South African Rand against the US dollar plays an additional negative role. A weaker Rand makes fuel more expensive at the pump.
In addition, South Africa imports most petroleum products. These include both crude oil and refined petroleum products. As a result, global price movements directly affect domestic fuel costs. Consequently, local fuel prices rise or fall in response to international trends and global oil price volatility.
The March 2026 increase occurred mainly because global oil prices rose. At the same time, geopolitical tensions intensified. Instability in global energy supply networks also contributed. These factors increased global oil price volatility. Political turmoil in major oil-producing countries increased market uncertainty. As a result, markets began to fear disruptions to major distribution and transportation routes.
Oil markets typically react quickly to geopolitical risks. These risks push crude prices higher. They also raise the cost of refined fuel products downstream. For an economy like South Africa that imports oil, the outcome often becomes unavoidable. Domestic energy prices increase whenever global oil price volatility intensifies.
The ripple effect across the economy
Unfortunately, the fuel price increase does not end with the consumer at the pump. Once fuel prices rise, the cost of moving goods also increases. Goods travel from agricultural, mining or production sites to manufacturing facilities. They then move to processing and distribution centres. Finally, retailers receive them. Each stage in this chain absorbs higher input costs.
Road freight logistics plays a crucial role in long-distance transport. Trucks move goods between ports, factories, warehouses and retail locations. Consequently, the entire logistics chain feels the impact of higher fuel prices driven by global oil price volatility.
At the same time, companies must remain financially viable. Transport companies, therefore, face a difficult decision. They must either increase their rates or absorb part of the fuel price increase. Some adjust rates fully. Others increase rates by only a percentage of the fuel rise. However, absorbing the increase places pressure on cash flow and financial reserves. Therefore, rate adjustments often become inevitable. This occurs because fuel price increases recur regularly. Even so, some transport operators temporarily absorb costs. They do so to preserve contracts and maintain client relationships.
The vulnerability of the transport sector
The March 2026 fuel price increase highlights the vulnerability of South Africa’s transport sector. The sector remains highly exposed to international energy trends and global oil price volatility.
At the same time, analysts already speculate about significant increases in April. These increases may occur if the current trajectory continues. A weaker Rand would intensify the pressure. Against this background, South Africa should consider several key questions.
Why can we not produce enough of our own (synthetic) fuels?
South Africa created Sasol decades ago to produce fuel domestically. The goal was to meet the country’s energy needs. Therefore, an important question arises. What happened to this capability?
South Africa remains a coal-rich country. Therefore, access to raw materials is not the main constraint. Coal remains relatively cheap locally. In addition, the country once implemented Union Spirits. This ethanol fuel programme operated during World War II. The programme demonstrated that alternative fuel production was possible.
Furthermore, South Africa has the agricultural capacity to support ethanol production. The country can grow sugar cane, which serves as the chief ingredient. Other crops can also supply the industry. Expanding this sector could help rescue companies such as Tongaat Hulett. At the same time, it could generate employment and attract investment.
Where are we with alternative fuel and energy resources?
Battery-driven vehicles have existed for many years. Admittedly, the technology still remains in an early stage. However, the country has not actively driven a national transition toward these vehicles. Such a shift would require infrastructure development. In turn, this development would generate significant employment and investment opportunities.
Meanwhile, many manufacturers, mines, warehouses, and distribution centres have adopted solar energy. Numerous commercial and retail businesses have done the same. Therefore, a key question emerges. Why does Eskom not actively encourage this shift rather than resist it?
Moreover, South Africa possesses considerable potential to become energy self-sufficient. The country has natural resources, technical expertise and infrastructure potential. Hydrogen technology also presents another opportunity. However, stakeholders have explored this option only minimally.
The fuel levy – how can it help?
The fuel levy may appear small against the backdrop of rising fuel prices. Nevertheless, policymakers could consider freezing levy increases temporarily.
At the same time, the country requires a long-term strategy. Policymakers must ensure that the fuel levy remains sustainable and effective. If the government does not spend the levy primarily on roads, then alternative uses require scrutiny. Ideally, some of these funds should support energy self-sufficiency initiatives.
How the general fuel levy functions
Currently, the National Treasury treats the fuel levy as general revenue. It flows into the national fiscus. Consequently, the government does not ring-fence the levy for road users. However, those who purchase fuel and pay the levy often expect well-maintained roads.
Some sectors receive partial relief. Farmers and shipping operators who purchase diesel can reclaim the fuel levy through the South African Revenue Service (SARS).
When the Ukraine war began in 2022, policymakers debated changes to the Basic Fuel Price methodology. During that period, the Department of Mineral Resources and Energy and National Treasury introduced a temporary R1.50 reduction in the general fuel levy.
More importantly, the government proposed a review of the Regulatory Accounting System (RAC). However, we believe that authorities never completed this review. Therefore, stakeholders should reconsider the RAC alongside the broader policy questions raised here.
In conclusion
It is also important to recognise how the general fuel levy functions. The levy generates substantial revenue for the fiscus. The government allocates portions of these funds to various fiscal needs. Therefore, any reduction in the levy would significantly affect the Treasury’s funding requirements.
Ultimately, South Africa cannot remain vulnerable to global oil price volatility. The country possesses both the resources and the technical capacity to change this reality. With appropriate investment, it could build the infrastructure required to secure its own energy needs. Moreover, it could achieve this goal relatively quickly and at a reasonable cost.
