South African motorists have reason to smile, as petrol prices are expected to decrease next week. This brings some much-needed relief at the pumps. Month-end data from the Central Energy Fund (CEF) shows a significant over-recovery for petrol. This points to a notable price cut in early August.
Thank you for reading this post, don't forget to subscribe!Bigger Drop for Petrol, but Diesel Set to Climb
According to the CEF’s latest figures, petrol users can expect a price cut of up to 35 cents per litre. However, diesel users will have to brace for increases of more than 60 cents per litre. This marks a clear divergence in the pricing trends between the two fuel types.
Expected Adjustments:
| Fuel Type | Expected Price Change (per litre) |
|---|---|
| Petrol 93 | Decrease of 35 cents |
| Petrol 95 | Decrease of 30 cents |
| Diesel 0.05% (wholesale) | Increase of 65 cents |
| Diesel 0.005% (wholesale) | Increase of 63 cents |
| Illuminating Paraffin | Increase of 29 cents |
The official prices for August will be confirmed by the Department of Mineral Resources and Energy before they take effect next Wednesday. However, with just days left in the month, significant changes in the fuel price outlook are unlikely.
Why the Drop in Petrol Prices?
The over-recovery on petrol has strengthened steadily throughout July, boosted by declining international oil prices and a relatively stable rand. The recovery balances started the month modestly but nearly doubled by the end, allowing for a more generous price cut.
However, diesel prices tell a different story. Global supply constraints and geopolitical tensions have continued to put upward pressure on diesel costs. Diesel prices began separating from petrol prices in June due to market instability. This was driven by the conflict in the Middle East and logistical issues around diesel supply chains.
Oil Market Volatility: Trump’s Influence Looms
Oil prices have recently climbed back above $70 per barrel. This increase is largely due to geopolitical tensions. Former U.S. President Donald Trump has taken a strong stance on Russia. He warns of economic consequences unless the war in Ukraine is resolved quickly. This raised concerns about potential disruptions in global crude supplies, particularly from OPEC+ members.
Additionally, Trump’s proposed “Liberation Day” tariffs set to come into effect on Friday, 1 August could shake up the global trade landscape. These tariffs would affect South African exports, adding to the uncertainty in local markets.
Although some analysts doubt the full enforcement of these tariffs, local markets are already bracing for a 30% tariff on South African exports. This would impact industries like automotive manufacturing and food processing.
The Rand: Resilient, But Slipping
Despite market volatility, the rand has shown surprising strength over most of July, averaging around R17.70/$. This helped fuel price over-recoveries, especially for petrol. However, as July ends, the currency has weakened slightly, currently trading near R17.93/$.
Investec Chief Economist Annabel Bishop explains that Trump’s trade policies and uncertainty around domestic interest rates are behind the rand’s recent losses. If no trade deal is struck, the tariffs could harm exports, reduce economic growth, and place further pressure on the local currency.
SARB’s Upcoming Interest Rate Decision
The South African Reserve Bank’s Monetary Policy Committee (MPC) is expected to announce its latest interest rate decision on Thursday, 31 July. Economists remain split on whether the bank will cut rates by 25 basis points or maintain the current level.
While the SARB has already made two 25bp cuts this year, further reductions are possible because South Africa’s inflation remains under control. However, any cut will need to balance economic support with concerns over a weakening rand.
Bishop noted that there’s still room for up to 100bp in further rate cuts if needed. However, with global uncertainty and Trump’s looming tariffs, the central bank may opt for a cautious approach.
While diesel users may face a steeper bill in August, petrol drivers can look forward to some relief. This is thanks to positive global oil trends earlier in the month and a rand that held firm for most of July. The coming days will be crucial. Both international developments and local policy decisions will shape what South Africans will pay at the pumps.
Related article: Expected Petrol Price Decrease for August Revealed
