This is why South Africans are paying more for petrol

South Africa saw a significant fuel price increase in February 2024, with another predicted for March, primarily due to the rand weakening against the dollar and Brent Crude oil prices increasing in recent months.

AA spokesperson Layton Beard told MyBroadband that the fuel hike that took effect in February shows the impact of the Houthi attacks on fuel cargo ships and the weakened rand.

“The impact of the geopolitical risks and the attacks on oil cargo ships in that Red Sea stretch through the Suez is causing an increase in the Brent Crude oil price,” said Beard.

He explained that Brent Crude oil is a benchmark and indicative of what is happening with other fuel prices.

“Brent increased on average from $77 to $82 a barrel from December to January. When you consider that we buy international oil and every barrel has gone up by $5, that’s a lot of money because we’re talking about billions and billions of barrels,” said Beard.

“Then you got to look at other factors. It’s been very cold in Europe and the US, and their stockpiles have been affected, which has also pushed oil prices higher.”

“So international oil prices have gone up. That’s having an impact on petrol, diesel, and paraffin and, at the same time, on average, the rand depreciated against the US dollar,” he added.

Beard noted that the rand didn’t depreciate against the dollar much but enough to impact South African fuel prices.

Layton Beard, Automobile Association of South Africa spokesperson

“If your buying power has diminished and the cost of the product you are buying has become more expensive, that’s going to lead to what they call an under-recovery, and therefore, you’re going to pay more at the pump,” he said.

Beard explained that motorists aren’t the only consumers impacted. Retailers like Checkers spend billions annually on diesel for their generators to keep the lights on during load-shedding.

Increased fuel costs mean the retailer will likely have to increase the price of products to absorb the fuel price increases.

Moreover, farmers who supply retailers like Checkers will also have to absorb higher fuel costs, meaning the retailer is already paying more for the product.

Therefore, the impact on the South African economy isn’t just limited to motorists. Many customers without vehicles will need to pay more for products like bread, milk, and eggs due to fuel price increases.

Beard said it’s impossible to confidently predict if the monthly fuel price increase trend will continue in 2024.

“It’s impossible to say because we don’t know what’s going to happen in a week’s time, let alone in a month’s time,” he said.

“To say that we are definitely going to pay more for fuel in July, August, September, is impossible because we don’t know what external factors will influence both of those factors (Brent Crude oil price and the rand’s buying power).”