South Africa's fuel price woes aren't over just yet, says economist

After what has been an especially tough year for fuel prices in South Africa, famed economist Dawie Roodt says we’re not out of the woods. Despite a major de-escalation between Iran and the US — the conflict that initially spiked global oil prices — Roodt reckons it could be some time before fuel prices see a substantial drop.

Rough times ahead

Roodt said as much in an interview with NSN over the weekend, shortly after oil prices had dropped below the $80/barrel mark. While those prices are certainly closer to the figures we saw at the beginning of the year, it may be a while before they settle around the ‘correct’ price for oil, which is approximately $65-70/barrel.

As it stands, South Africa is on track to receive a decent reduction of R2.94/l from the petrol price, while diesel faces an even larger R4.96/l cut. Of course, that’s before the National Treasury adds the remainder of the fuel tax levies back in July, which will then bring the price cuts closer to R1.44/l and R3.04/l, respectively.

The delay in the return to normalcy is thanks to countries restocking their oil reserves, according to Roodt.

“Over the next couple of months, there will be demand from many countries just to top up on their reserves,” he said. “There’s always the risk that the president of the United States may decide to kick-start the war all over again…” he continued.

This continued reliance on oil in the coming months could prevent the price from dropping back to a more comfortable figure (for South African motorists, anyway). Once other countries have topped up their reserves, the price may trend downwards, leading to price slashes at the pumps. Even if international oil prices do continue to fall, Roodt believes the government may step in to ruin the fun.

“I think in South Africa we will see a reduction in the petrol price, not in the next month or two because the Minister of Finance is likely to try to recoup some of the lost tax revenue,” he said.

“So he will keep the taxes relatively high until he’s got his money back that he’s so-called given to us, and then the petrol price can come down quite nicely.”