South African motorists are set for some welcome relief at the pumps, with a petrol price cut of around R1.10 a litre on the cards for July — even as the National Treasury restores the last of its fuel levy relief. After months of painful increases, both sides of the fuel price equation are finally swinging in drivers' favour.
According to Investec chief economist Annabel Bishop, the Central Energy Fund's over-recovery for petrol and diesel continues to point to cuts next month. As of 9 June, petrol was running an over-recovery of about R2.60 a litre, while diesel sat between R4.83 and R5.03 a litre.
The levy giveth and taketh away
The catch is that the Treasury is adding the full fuel levy back into prices from July, having phased out the temporary relief it offered earlier in the year. That will claw back R1.50 a litre from the petrol over-recovery and R1.96 from diesel. Even so, the recoveries are large enough to absorb the blow and still leave motorists better off, with petrol pointing to a roughly R1.10 cut and diesel to a far steeper drop of close to R3 a litre.
"A declining, as opposed to increasing, fuel price is positive for inflation," Bishop said, adding that a softer petrol price should help ease price pressures across the broader economy.
Oil and the rand pull in the same direction
The improvement is being driven by easing global oil prices and a resilient rand. Crude has slipped to around $93 a barrel, down about 3% on the week, after Iran and Israel halted their attacks on one another. Bianca Botes, managing director at Citadel Global, cautioned that the backdrop remains fragile, with sporadic fighting underscoring the risk of a return to full-scale conflict.
The rand, meanwhile, has held its ground around R16.45 to the dollar despite the Middle East volatility, supported by a credit rating upgrade from Fitch and better-than-expected first-quarter growth figures from Stats SA. Bishop noted that an expected interest rate move next month should lend the currency further support. For households still battling stubborn living costs, a cheaper tank of petrol — however modest — will be a rare piece of good news.
