Fuel prices to remain high despite ceasefire, economist warns
South Africans are unlikely to see immediate relief in fuel prices, despite the recent ceasefire in the Middle East, as global oil prices remain significantly higher than pre-conflict levels.
This is according to Econometrix chief economist Azar Jammine, who said the ceasefire has eased fears of a dramatic spike in fuel costs, but has not reversed the overall upward pressure on prices.
"Much still depends on what will happen with regard to the Middle East conflict. This is just a ceasefire, it's not the end of the war. And as a result, even though oil prices have fallen back, they are still very high compared with where they were prior to the war. Prior to the war, oil prices were at around $70 a barrel,"
"They have been at around $110 a barrel in recent times. After the ceasefire, it's fallen back to $95, but that's still a lot higher than $70. So as a result, there is no way that one can yet look to any fuel price relief for at the moment."
Jammine warned that damage to energy infrastructure in the Gulf region is likely to prolong supply constraints, keeping fuel prices elevated for the foreseeable future.
"There has already been a lot of damage to energy production facilities and refineries in the Gulf region through bombing by Iran. As a consequence, I don't believe that we will see a restoration of fuel supplies to the level that would ordinarily have prevailed. So there will still be a shortage that will keep prices elevated for some time."
Beyond oil, Jammine noted that the conflict has disrupted global supply chains for key commodities, including fertiliser, plastics, sulphur, and helium—factors that could have broader economic consequences across multiple industries.
"There has already been a big disruption of supply chains of a variety of products, including fertilizer, plastics, sulphur, helium, and the like, that affect a variety of industries."
While the ceasefire has reduced the risk of a sharp spike in fuel prices in the coming months, Jammine said consumers should still brace for further increases—albeit more moderate than previously expected.
"Instead of having another huge increase in fuel prices in May, you will have another increase in fuel prices, but nowhere near as bad as what one had thought would be the case."
The continued pressure on fuel costs is expected to feed into inflation, with Jammine forecasting that inflation could rise to around 4% or slightly higher, above the South African Reserve Bank’s target midpoint.
"So we are still talking about inflation moving up to 4% or slightly more…But it still means that the Reserve Bank will be under pressure to raise interest rates to some extent when it meets again at the end of May. But at least we may not be looking at a 0.5% interest rate increase, but just one of, say, 0.25%," he said.
Jammine also pointed out that the rand has come under pressure in recent weeks due to global market uncertainty, although it remains stronger than it was at the same time last year.
Despite the challenges, Jammine said the ceasefire had at least removed the immediate threat of a dramatic surge in fuel prices, offering some relief to policymakers and consumers alike.
However, he cautioned that it was still too early to make definitive predictions, with several weeks of oil price movements still to be factored into the next fuel price adjustment.
"It's still very early days. We're only at the 8th of April, and there are another three weeks of oil prices that we have to take into account before we can make a definitive conclusion about what will happen to fuel prices next month."
