Africa-Press – South-Africa. Despite global oil markets pulling back and the rand showing resilience in the face of turmoil, fuel price recoveries remain squarely in the negatives, pointing to hikes coming next week.
According to month-end data from the Central Energy Fund (CEF), fuel prices have stuck in under-recovery territory since Israel’s attack and subsequent US bombing of Iran in the past two weeks.
Petrol prices are showing an under-recovery of around 50 cents per litre, while diesel has an under-recovery of around 82 cents per litre.
While oil prices have pulled back significantly since the escalation of war between Israel, the US and Iran—and the rand has remained fairly stable—the rapid changes have likely come too late in the month to affect recoveries.
This is how recoveries reflect at the end of July:
Petrol 93: increase of 50 cents per litre
Petrol 95: increase of 53 cents per litre
Diesel 0.05% (wholesale): increase of 82 cents per litre
Diesel 0.005% (wholesale): increase of 84 cents per litre
Illuminating paraffin: increase of 67 cents per litre
Fuel prices were lining up for a small cut until about the middle of the month, when Israel launched an attack on Iran.
This led to a surge in global oil prices, which pushed local fuel price recoveries into the red.
Markets remained on edge as Iran retaliated to the attacks, but were pushed into a panic once the United States bombed the country’s nuclear facilities, joining and escalating the war.
Oil initially pushed past $80 a barrel, but pulled back to around $75 a barrel after Iran pulled its punches in retaliation for the US attack.
The commodity retreated even further when a ceasefire was announced, dropping almost 18% and returning to sub-$70 levels.
Prior to the 12-day Iran-Israel war, prevailing expectations were for a supply surplus this year amid weak demand and rising OPEC+ production.
Once the Strait of Hormuz closure threat was largely removed, markets reverted to pricing in this surplus.
Unfortunately, the impact of the almost two-week conflict on petroleum prices had already taken root, as reflected in the 70-100 cents per litre under-recovery in local fuel prices.
The rand is helping
While the oil price story is not positive for local fuel, the rand has maintained relative strength throughout what has been a tumultuous month.
According to the Bureau for Economic Research, the US attack and limited Iranian response made for a volatile week in financial markets, but the rand held its own.
As has been the case for some time, the rand’s position has been determined more by external factors like the dollar’s strength or weakness than by anything local.
The rand weakened when the US attacked Iran, as markets poured into the dollar seeking a safety net. The local unit then strengthened when markets returned to risk-seeking.
After US President Donald Trump signalled he might seek a successor for the US Fed sooner than expected, the dollar weakened again, boosting the rand.
The BER noted that all these ups and downs have resulted in the rand appreciating against the dollar this week by about 2%, with little change against the UK pound and the euro.
The rand’s stability has helped cut the under-recovery by about 16 cents per litre, keeping some of the bad news contained.
A potential disruptor to the rand could be the recent tensions rising between the DA and the ANC in the Government of National Unity, but markets have shown little reaction to the development.
President Cyril Ramaphosa fired a DA deputy minister on Thursday, sparking fury from his biggest coalition partner in the GNU.
The DA has demanded the president fire three ANC officials mired in allegations of corruption and wrongdoing, giving him 48 hours to do so or face “grave consequences”.
However, it is not yet clear what the consequences will be should these demands not be met, sparking some concerns that the GNU itself may be at risk.
The BER said that while this is the latest flashpoint in a tense relationship, the parties have found common ground before.
Regardless, as with the pullback in oil, any significant weakening of the rand at this point in the month is unlikely to sway the current fuel recoveries and thus changes for July.
The Department of Petroleum and Mineral Resources will announce the official changes sometime before they come into effect on Wednesday, 2 July 2025.
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