By Lehlohonolo Lehana.
South Africans can look forward to substantial fuel price savings from Wednesday, April 2, with both petrol and diesel seeing notable drops.
The price of petrol 93 will drop by 58 cents per litre, while petrol 95 will decrease by 72 cents per litre.
The price of diesel (0.05% sulphur) decreases by 83.8 cents per litre, while diesel with 0.005% sulphur goes down by 85.8 cents per litre.
Meanwhile, illuminating paraffin will cost 81.7 cents less per litre, while the price of LP gas decreases by 79 cents per kilogramme.
Local fuel prices are largely driven by two components: international product prices—determined by global oil prices—and the rand/dollar exchange.
Over the review period, the average Brent Crude oil price decreased from $74.89 to $71.04.
The main contributing factors to the lower prices were the continued supply from non-OPEC countries as well as the anticipated increase in supply, though moderate, from OPEC + producers in April 2025.
This led to lower contributions to the Basic Fuel Prices of petrol, diesel and illuminating paraffin by 66.36 cents per litre (c/l), 80.10 c/l and 72.07 c/l, respectively.
Meanwhile, the rand appreciated, on average, against the dollar from R18.50/$ to R18.30/$ compared to the previous period.
This led to lower contributions to the Basic Fuel Prices of petrol, diesel and Illuminating Paraffin by 11.72 c/l, 12.42 c/l and 12.24 c/l respectively.
During his March Budget speech, the Minister of Finance announced that the Fuel Levy on petrol and diesel will remain the same at 396.00 c/l and 384 c/l, respectively, while the Road Accident Fund (RAF) Levy on both petrol and diesel will remain at 218.00 c/l in his Budget Speech on the 12th of March 2025.
However, the carbon fuel levy will increase by 3.00 c/l to 14c/l for petrol and 17c/l for diesel.
Consequently, the fuel levies will increase to 399.00 c/l on petrol and 387.00 c/l on diesel with effect from the 2nd of April 2025.
The slate levy remains unchanged at zero cents per litre in the price structures of petrol and diesel.
Investec chief economist Annabel Bishop explained that this is largely due to expected interest rate cuts in the United States.
US interest rate cuts positively affect emerging market currencies, boosting the rand as local financial assets become relatively more attractive to investors.
As a result, the rand also gained on the repo rate being left unchanged in South Africa in March, with the Reserve Bank’s Monetary Policy Committee (MPC) not coming across as dovish, further bolstering the rand.
With the repo rate currently at 7.50%, the SARB’s “forecast sees rates stabilising at a neutral level of about 7.25%”, i.e., there will be only one more cut in the cycle.
The MPC’s cut is forecast for 2025, with the repo rate remaining at this rate until the end of 2027, close to the previous meeting’s end-2027 forecast. Flat to higher interest rates in South Africa tend to support the rand.