Diesel price shock looms despite petrol relief as oil volatility bites

According to Frank Blackmore, Lead Economist at KPMG South Africa, the latest Central Energy Fund over recovery and under recovery data indicated that petrol prices are expected to decrease slightly, while diesel and illuminating paraffin are on track for substantial increases. "Based on the current Central Energy Fund numbers for the over under recovery on fuel prices, petrol prices seem to be going down by between R0.20 and R0.26," Blackmore said. He added that the outlook for diesel painted a very different picture. "We could see an increase in diesel from around R1.27 to about R1.50 in August, and illuminating paraffin is also up by over a Rand." Blackmore cautioned that the figures remain provisional, with the final calculations to be completed and the Department of Mineral and Petroleum Resources announces the official adjustments. "There can be some small changes in terms of those numbers. However, it looks as if diesel will go up by over a Rand while petrol might come down slightly," he said. While motorists using petrol powered vehicles may welcome the expected reduction, Blackmore warned that the sharp increase in diesel prices would have broader consequences for the economy. South Africa's freight transport sector has become increasingly reliant on road transport as challenges within the country's rail network persist. With heavy duty trucks and commercial vehicles predominantly using diesel, higher fuel costs are expected to filter through the supply chain. "That's an overall negative because with the non functioning rail system, we need to move a lot more freight on the road, and that often uses diesel," Blackmore said. He added that rising diesel prices were likely to place additional pressure on inflation. "Therefore, we can expect this price to lead to higher inflation in terms of transport costs." Debt Rescue CEO Neil Roets said the broader concern extends well beyond the fuel price adjustment itself, with many households already struggling to cope with rising living costs. "The most important issue for consumers is not the fuel price adjustment in isolation, but the broader pressure already weighing on household budgets. Whether fuel prices increase or petrol motorists receive limited relief, many South Africans remain financially stretched and have very little capacity to absorb further increases in essential living costs," Roets said. Roets said the diesel increase was particularly concerning because of its widespread impact across the economy. "From a consumer debt perspective, a sharp diesel increase is particularly concerning because diesel is embedded in the cost of transporting food, operating public transport, supporting agriculture and delivering essential goods. Even consumers who do not drive diesel vehicles may therefore feel the impact through grocery prices, transport fares, delivery charges and everyday services." He warned that households experience these rising costs simultaneously rather than individually. "These increases may appear separately, but households experience them collectively within the same monthly budget." Roets said Debt Rescue was seeing increasing signs of financial distress among consumers. "In our work with financially distressed households, the warning signs extend beyond missed debt repayments. They include using credit for groceries, postponing municipal or insurance payments, moving money between accounts to cover debit orders and relying on short term loans before payday. These are signs that essential living costs are beginning to exceed available income." While the South African Reserve Bank's decision to leave the repo rate unchanged at 7% had prevented another increase in debt repayments, Roets said it had done little to ease financial pressure. "The South African Reserve Bank's decision to keep the repo rate unchanged at 7% prevents another immediate increase in variable debt repayments, but it does not reverse the pressure facing households." He added that although the Slate Levy could potentially allow for a larger petrol price reduction if significantly reduced, consumers should not rely on that possibility until the final adjustment is announced. "The real concern is cumulative affordability erosion. When food, transport, electricity and debt costs remain elevated, households are forced to stretch limited income across essential living expenses. Regardless of the final fuel price adjustment, consumers remain under significant financial pressure, and even limited additional costs can make an already difficult monthly budget harder to manage." Higher transport costs typically filter through the economy by increasing the cost of moving food, agricultural products, manufactured goods and retail stock. Economists said these additional expenses are often passed on to consumers, adding further pressure to already constrained household budgets. Although the expected petrol price reduction will offer limited relief to motorists, the anticipated diesel increase is expected to have a far greater impact on inflation, business costs and the cost of living in the months ahead.