As South Africans prepare to welcome 2025, motorists might face an uphill battle regarding petrol prices. If current trends persist, petrol and diesel users could pay more for less at the pumps. A combination of unfavourable economic conditions and volatile global oil prices is set to push prices higher, making January a particularly tough month for fuel affordability.
Weak Rand and Global Oil Prices Signal Price Hikes
The South African rand’s recent weakening against the US dollar has tipped fuel price recoveries into negative territory. This unfavorable exchange rate, paired with fluctuations in global oil prices, points to increases in both petrol and diesel prices. The adjustments, slated for implementation on January 1, 2025, mark the first fuel price review of the year.
Initial forecasts suggest that the changes might be modest. However, data from the Central Energy Fund (CEF) warns that the under-recoveries are likely to grow, with larger increases potentially materializing as the month progresses. By month-end, the cumulative rise in costs could reach around 20 cents per litre.
Expected Fuel Price Changes for January 2025
The preliminary data outlines the following potential changes to fuel prices:
- Petrol 93: An increase of 14 cents per litre
- Petrol 95: An increase of 7 cents per litre
- Diesel 0.05% (wholesale): An increase of 2 cents per litre
- Diesel 0.005% (wholesale): An increase of 5 cents per litre
- Illuminating Paraffin: A decrease of 11 cents per litre
While illuminating paraffin users may find some relief, most motorists will feel the sting of these adjustments.
Key Influencers: Global Oil Prices and Exchange Rate
Fuel prices in South Africa are determined by two critical factors: the cost of crude oil on the global market and the rand/US dollar exchange rate.
Global Oil Prices
As of December 23, 2024, Brent crude oil was trading at $73.27 per barrel. This price reflects the ongoing volatility in international oil markets, which remain sensitive to geopolitical and economic events. Any sharp changes in crude oil prices could further impact South African fuel costs.
Rand/US Dollar Exchange Rate
The rand recently weakened to R18.30 against the US dollar, following the Federal Reserve’s announcement of a rate cut. A weaker rand makes it more expensive for South Africa to import crude oil, driving up fuel costs.
The exchange rate is particularly concerning, as it directly influences the Department of Mineral Resources and Energy’s (DMRE) calculations for fuel price adjustments. If the rand continues to struggle against the dollar, motorists should brace themselves for additional price increases in the months ahead.
The Impact of the “Trump Effect”
Adding to the economic pressure is what some analysts have dubbed the “Trump effect.” Following Donald Trump’s recent victory in the US presidential election, there is widespread speculation that his policies may negatively affect emerging markets, including South Africa. Trump’s inauguration on January 20, 2025, could introduce further uncertainty, putting additional strain on the rand and, by extension, local fuel prices.
Petrol Price Forecast: Reflecting on Recent Trends
The anticipated January increases follow a series of challenging months for South African motorists. November 2024 saw the end of a five-month streak of declining fuel prices, with significant hikes introduced that month. December brought additional increases, adding to the financial burden at the pumps.
While the forecasted January changes may seem small in isolation, they signal a concerning trend for the year ahead. With global oil prices and the rand/dollar exchange rate both showing instability, the likelihood of sustained fuel price hikes in 2025 is high.
Planning for a Costlier Year
South African motorists should prepare for a potentially expensive year when it comes to fuel. Budget adjustments and more fuel-efficient driving habits may become necessary as the economic pressures mount.
In the broader context, fuel price increases also have a ripple effect on the economy, influencing transportation costs and the price of goods and services. Policymakers and stakeholders must monitor these developments closely to mitigate the impact on consumers and businesses.
Although the January adjustments may be minor, the warning signs are clear: fuel costs could climb steadily in the coming months, making 2025 a challenging year for South Africans.
Related article: December Petrol Price Update: Minimal Petrol Cuts and Rising Diesel Costs Ahead
