Oil shock threatens August fuel relief for South African motorists

South African motorists may still see a drop in pump prices in August, but renewed conflict involving the United States and Iran has raised the risk that rising international oil prices will erase those gains.

CEF data shows over-recoveries for now

Daily data from the Central Energy Fund (CEF), released on 13 July, points to over-recoveries across all major fuel grades, signalling that fuel price cuts remain possible if current trends hold through the rest of the month.

Geopolitics pushes oil markets higher

Renewed military action involving the United States and Iran has made the international oil market more volatile, with the Strait of Hormuz again a focal point of concern. Analysts cited in the source warn that continued instability could keep crude prices elevated, which would increase costs for fuel-importing countries such as South Africa.

What drives South Africa’s monthly adjustments

South Africa’s monthly fuel price adjustments are based on two factors: international refined petroleum product prices and the rand/US dollar exchange rate. If both remain supportive during the remainder of July, motorists could still see a reduction when the Department of Mineral and Petroleum Resources announces the official August fuel price adjustments at the end of the month.

Government moves to bolster fuel security

The Department of Mineral and Petroleum Resources has published a draft Strategic Petroleum Stocks Policy proposing compulsory emergency fuel reserves for both government and the private sector. Under the proposal:

• Licensed fuel wholesalers and importers would be required to hold strategic fuel stocks equivalent to 21 days of supply
• The state would maintain emergency reserves equal to 60 days of supply
• The reserves would be released only during declared national fuel emergencies

The policy is designed to improve South Africa’s energy security as the country becomes increasingly reliant on imported fuel following the closure of several domestic refineries.

Projections and a finely balanced outlook

The CEF projections received by The South African show potential decreases for August if market conditions hold through the rest of the pricing period:

• Petrol 93: decrease of 145 cents per litre
• Petrol 95: decrease of 142 cents per litre
• Diesel 0.05%: decrease of 82 cents per litre
• Diesel 0.005%: decrease of 111 cents per litre
• Illuminating paraffin: decrease of 112 cents per litre

With more than two weeks of July’s pricing period still remaining, the direction of international crude prices and the rand will determine whether these over-recoveries hold or disappear before month-end.

Timing

The final overall price changes will be confirmed later in the month, with the new prices taking effect at midnight on Tuesday, 28 July or Tuesday, 4 August.