Frank Blackmore | Lead Economist | KPMG South Africa | mail me |
The war in Iran, particularly supply blockages through the Strait of Hormuz, has pushed global oil prices sharply higher. Before the conflict began, oil traded at around $68 per barrel. It now sits near $105 per barrel. This shift represents an increase of about 54%.
At the same time, the South African currency has weakened. The Rand moved from about R15.92 to roughly R16.75 against the US dollar. This change reflects a depreciation of around 5%. Consumers should start preparing for the April increase as these factors push fuel costs higher. As a result, the basic fuel price will rise significantly.
Current estimates suggest an increase of about 42%. Consequently, the new price could be roughly R5.30 higher in April than it was in March.
Current fuel price implications
For 95 octane inland, this represents a price increase of about 26%. However, the price would still remain below the peak levels seen roughly a year ago during the height of inflation.
If we examine the over- or under-recovery on fuel prices, the current numbers do not approach the R5 mark. Based on Friday’s prices, petrol would likely increase by about R2.80. Meanwhile, diesel could rise slightly higher, close to the R5 level. Therefore, fuel prices could still rise to around R8, as some weekend reports suggested. However, such an increase would require further rand depreciation and significantly higher oil prices.
Households should be aware and begin preparing for the April increase to mitigate potential shocks. Consumers have few ways to avoid this impact. Fuel prices influence the movement of nearly all goods and services. As a result, the effects spread widely across the economy and contribute to inflation.
Current estimates suggest the direct inflation impact would reach about 1%. This would push inflation to roughly 4.5% in April. However, this estimate does not account for additional changes in other goods and services during the same period.
Consumer guidance
According to Hayley Parry, Money Coach and Facilitator at 1Life’s Truth About Money, households should prepare for possible increases.
Recent reports warn that South Africa could face a petrol price increase of up to R8 per litre. Rising global oil prices drive this risk, largely due to geopolitical tensions in the Middle East and the United States.
A sudden increase of R8 per litre would place significant pressure on household finances. Proactive households should focus on preparing for the April increase to ease the financial strain.
Steps to mitigate the impact
The petrol price will undergo its monthly review on 1 April. Meanwhile, the Department of Mineral Resources and Energy will announce the official price change only a few days before that date. Consumers, therefore, have just under a month to prepare financially.
Consumers can take several practical steps during this time:
- Consumers should tighten their budgets. They should avoid unnecessary new debt. In addition, they should identify non-essential spending that can be paused temporarily.
- Households should set aside money where possible. This step can soften the financial impact during the next month or two.
- Consumers must recognise that higher fuel prices will affect more than transport costs. The increase will likely raise food prices and electricity costs. It will also influence everyday living expenses.
Proactive planning, careful budgeting and reduced fuel dependence can help limit the impact. Consumers who anticipate changes and adjust their spending are better positioned to absorb price shocks.