Fuel Price Outlook: Rand Weakens, Oil Prices Rise, and Risks Mount for Motorists
Early data from the Central Energy Fund (CEF) indicates that the recent fuel price relief driven by a stronger rand is losing momentum. Fuel price recoveries are now significantly lower than last month and continue to decline as market conditions shift.
At the start of the month, the rand has stabilised above R16.00 to the US dollar, while international oil prices remain elevated. This combination is gradually reversing the earlier gains that had supported lower fuel prices.
Petrol Still in Over-Recovery, but Momentum Fading
According to the CEF, petrol prices remain in positive territory, with an over-recovery of approximately 22 cents per litre. However, this is a sharp drop from the roughly 50 cents per litre recorded just days ago, highlighting the rapid change in market dynamics.
Diesel prices paint a more concerning picture. Recoveries started the month in negative territory and have worsened, with diesel now showing an under-recovery of about 34 cents per litre.
Projected Fuel Price Adjustments (End of January)
Based on current data, the following fuel price changes are projected:
Petrol 93: decrease of 22 cents per litre
Petrol 95: decrease of 23 cents per litre
Diesel 0.05% (wholesale): increase of 33 cents per litre
Diesel 0.005% (wholesale): increase of 35 cents per litre
Illuminating paraffin: increase of 10 cents per litre
Oil Prices and Geopolitical Tensions Driving the Shift
The reversal in recoveries is largely due to rising global oil prices, which began climbing sharply toward the end of January. This was driven by escalating geopolitical tensions between the United States and Iran.
As a result, petrol’s over-recovery has narrowed significantly, while diesel prices have slipped further into under-recovery.
Rand Still Supporting Fuel Prices — For Now
Although the rand has weakened from January lows below R15.70/$ to above R16.00/$, it remains relatively strong compared to earlier monthly averages. This means the exchange rate is still contributing to fuel price over-recoveries, albeit at a diminishing rate.
The rand’s recent losses are largely attributed to a strengthening US dollar, as markets react to speculation around the appointment of Kevin Warsh as chair of the US Federal Reserve.
Adam Phillips, treasury specialist at Umkhulu Treasury, noted that the rand is facing technical pressure.
“The ZAR is right on a resistance level. Having been one of the darlings a couple of weeks ago, it has now become one of the worst performers,” he said, adding that high-beta emerging market currencies are inherently volatile.
Budget 2026 Poses a Major Risk to Fuel Prices
Fuel price recoveries are currently finely balanced and could swing in either direction for the remainder of the month. This leaves prices highly exposed to both international developments and local policy decisions.
One of the most significant upcoming risks is South Africa’s 2026 national budget.
Investec Chief Economist Annabel Bishop has warned that the budget, due at the end of the month, could introduce further fuel-related taxes, similar to what occurred in 2025.
Potential increases could include adjustments to the general fuel levy, carbon taxes, or other fuel-linked charges. These taxes already account for roughly half of the price motorists pay at the pump.
Depending on the size of any increase, Bishop cautioned that most — if not all — of the current petrol over-recovery could be wiped out.
The fuel levy remains one of the easiest revenue sources for the National Treasury, particularly after being frozen for three years between April 2022 and May 2025. In the 2025 budget, fuel taxes were increased by 15 cents per litre to compensate for the scrapping of a planned VAT hike.
As a result, South African motorists face a highly uncertain fuel price outlook, with market volatility and fiscal policy both posing significant risks in the weeks ahead.
Businesstech
