Behind the surge in South Africa’s petrol price
20 June 2022
The underlying reason for the price increases is movements in the international price of crude oil. The acceleration in the international price of crude oil is linked to the Russian war in the Ukraine.
The expectation is that the crude oil price will remain at an elevated level for the duration of the war.
Internationally, crude oil is priced in US dollar per barrel. Recently the price exceeded US$120 per barrel. This is not the highest level ever for the crude oil price.
The highest ever nominal historic level of US$147.02 per barrel was reached on 11 July 2008. On that occasion the price of crude oil increased owing to military tension about Iran.
Adjusted for inflation since 2008, this amounts to some US$200 per dollar in current values. There is therefore room for further increases in the price of crude oil.
The crude oil price in US dollar is determined by international forces of supply and demand.
The international oil price pressure leads to higher landed cost for fuel in South Africa. The landed cost in US dollars is converted to rand at the prevailing exchange rate.
Any weakness in the rand exchange rate against the US dollar therefore results in a higher domestic petrol price.