Same old oil, much bigger hit on the pocket

We have been here before. Oil is trading at around $100 a barrel, international tensions are disrupting supply, and South Africans are paying more at the pump.

But something feels different. We saw oil above $100 in 2008, yet petrol cost considerably less.

Why is the latest crisis pushing our fuel bill so much higher?

Read:
SA’s fuel import bill surges to highest level since 1994
South Africa fuel prices head to record high after oil shock

The answer begins with what has changed between the oil market and our petrol tanks.

The announced R3.33 increase for 95 petrol from 7 October takes the September Gauteng price of R26.92 to about R30.25 a litre. The Department of Mineral and Petroleum Resources (DMPR) blames higher oil prices and shortages of petrol and diesel internationally for the latest increase.

But these do not, on their own, explain how we arrived at this price.

The same barrel costs us more

In March 2008, Brent crude averaged $104 a barrel, while 95-octane petrol cost R8.25 a litre in Gauteng.

By July that year, petrol had reached R10.70 as oil climbed further.

These are prices before adjusting for inflation, but the difference still illustrates the point.

Around mid-2008, the rand traded near R8 to the dollar, according to data from the South African Reserve Bank. The latest fuel-price review uses roughly R16.21.

Holding oil at $100 a barrel shows what the exchange rate alone changes:

Cost of $100 barrel in rands

Mid-2008
Current review

USD/ZAR rate (approx)
R8
R16.21

Rand cost per barrel
R800
R1 621

The rand has weakened to roughly double the 2008 rate, before taking into account the costs of refining or transporting to a filling station.

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This matters because South Africa buys its oil in US dollars.

We also tax each litre more heavily

According to the published South African Revenue Service (Sars) tariff amendments, the general fuel levy on petrol was R1.27 a litre in April 2008.

Today it sits at R4.10 – an increase of approximately 223%.

On a 50-litre fill up, that is about R231 more in these levies alone.

These taxes have not been the cause of this week’s fuel price increases, but they have raised the starting point from which an international price shock hits motorists.

Levy per litre

April 2008
October 2026

General fuel levy
R1.27
R4.10

Road Accident Fund levy
46.5c
R2.25

Combined
R1.74
R6.35

Removing the general fuel levy would offer immediate relief of R4.10 a litre if passed through in full.

At a petrol price of R30.25, that would bring it down to R26.15, with the Road Accident Fund (RAF) and carbon levies still in place.

The difficulty is replacing that revenue.

Read: Government considers cutting or scrapping RAF fuel levy

Applying today’s general levy rates to 2024 petrol and diesel recorded sales suggests roughly R89 billion annually, before refunds and other adjustments. That would be a substantial amount for the fiscus to surrender.

We produce less of our own fuel

South Africa once had six major fuel-production refinery facilities.

Today, it has three – Natref, Astron’s Cape Town refinery and Sasol’s Secunda operations.

Industry figures show that their combined operating capacity in 2024 was roughly half the peak recorded between 2016 and 2019.

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That leaves us more dependent on overseas suppliers of finished petrol and diesel.

When those products become scarce, we are competing for them alongside other importing countries.

Local refining could reduce that exposure and potentially save money if producing fuel here is cheaper than importing it. But a South African refinery still needs feedstock, maintenance and financing. Our pricing formula already follows international fuel prices. Any local cost advantage that would come from this would be aimed at benefitting consumers.

To get an idea of the potential of refineries, let’s assume local production saves 50c on each litre replacing an import, after all costs. Under our current capacity assumptions, retaining the lost production capability could provide about 28c of average relief across the petrol and diesel market. One additional refinery that can produce 150 000 barrels a day could provide about 12c saving.

The table below applies those examples to the R26.92 Gauteng 95 petrol price in force on 6 October.

Separate scenario

Illustrative price per litre
Saving per litre

Existing price
R26.92
–

Lost production capacity regained
R26.64
28c

One additional refinery
R26.80
12c

General fuel levy removed
R22.82
R4.10

The refinery rows assume a 50c net saving on each local litre replacing an import, spread evenly across buyers and passed through in full. All other levies remain.

Importantly, these are examples, not promised discounts.

A refinery of that size would also be expensive. An initial estimate to would be R81 billion to R130 billion, based on international comparisons. A proper South African feasibility study would be needed before committing to that figure.

Our reserves deserve more attention

Then there is the matter of strategic reserves, which is an equally important matter.

Minister of Mineral and Petroleum Resources Gwede Mantashe recently told parliament the Strategic Fuel Fund (SSF) holds 6.9 million barrels of oil. The industry’s historical record places the peak at 158.5 million barrels in 1988.

The reported current stock is approximately 96% below that level.

That decline may span decades, but it raises a question about the decline in protection against supply shocks and disruptions.

The reported estimate of around 30 days’ crude cover also needs context. It refers to the amount our refineries can process, rather than all the petrol and diesel the country needs. A barrel of crude cannot keep a truck moving until it has been refined and delivered. We therefore need reserves of both crude and finished fuel.

Government has proposed 60 days of net-import cover, rising to 90 days over time. The SFF’s infrastructure provides a good foundation, however buying the stocks and getting them to customers must be funded too.

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Buying time when prices rise

China offers a useful example when it relates to managing reserves.

In 2021, it announced sales of state-owned oil stocks to domestic refiners to ease manufacturers’ cost pressures.

Reserves give a country room to respond when supplies tighten, rather than forcing it to buy everything it needs during a crisis.

South Africa could build stocks gradually when conditions are favourable and release them during serious disruptions.

Finished-fuel reserves would offer immediate support; crude reserves would keep operating refineries supplied.

Any cheaper supply would need to reach consumers. Stocks also need replenishing, so reserves can soften a temporary shock rather than support permanently low prices.

The benefit extends beyond motorists. Diesel costs affect farming, freight and the movement of goods. Avoiding shortages and emergency purchases can help contain pressure on those costs.

To put this into perspective, a 5% reduction in household fuel prices would directly lower annual headline inflation by roughly 0.22 percentage points, using August’s inflation basket and holding other prices unchanged. That is merely an example, not a forecast of what reserves or a refinery would deliver.

What we can change

The comparison with 2008 gives us a clearer explanation for today’s fuel costs.

A weaker rand makes the same dollar-priced barrel more expensive, higher levies add more to each litre, and reduced production and smaller reserves leave us with fewer options when international supply becomes strained.

We cannot control the international oil price. But we can decide how much tax we add, how much fuel we produce and how much protection we keep for the next crisis. Those decisions deserve as much attention as the next monthly increase.

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