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South Africa may be heading for a severe diesel price shock by the middle of this year that, especially if matched by rate hikes, may crush African National Congress (ANC) support heading into the local government elections and spark mass political instability.

Frans Cronje told The Common Sense that current estimates show South Africa may face a diesel price of near R40/litre towards the middle of the year if the rand and oil prices hold at their current levels.

The warning comes after the Department of Mineral and Petroleum Resources announced significant fuel price hikes effective today. Petrol will rise to R26.52/litre, while diesel will rise to R31.17/litre. The blow of these price hikes was softened by a temporary fuel levy reduction of 300c/litre for petrol and 393c/litre for diesel, which will be implemented from 6 May to 2 June 2026.

Without that temporary levy reduction, the diesel price would already be at around R35.00/litre. That means the present price does not fully reflect the pressure building in global oil markets. It is being held down, for now, by a short-term policy intervention.

Roughly a third of the fuel price is accounted for by taxes, meaning current petrol and diesel prices would be appreciably lower were it not for that tax burden. The government will be reluctant to suspend or relieve those taxes, given the implications for the fiscus, although the current fuel price does demonstrate the counter-productive nature of the secondary and back-door taxes that the public is often not fully aware of.

Taxes notwithstanding, the potential fuel price shock bearing down on South Africa arises from the fact that oil prices have held near $110/barrel over the past 10 days. That is around 10% above the level of the period used to calculate the current fuel price. If oil remains near the $110 level, and if the rand holds its current levels, the next round of fuel adjustments could be much more painful for consumers and businesses.

At $100/barrel, the oil price is broadly in line with its 10-year-plus inflation-adjusted average, meaning that while fuel price increases to date have hurt consumers, the effects have not been to trigger significant economic reversals, and most global growth forecasts have in fact held up strongly. At $110/barrel or higher, however, it is well above that inflation-adjusted level, and that will be materially damaging to both the global and domestic economic outlook.

That matters because diesel is not only a fuel used by motorists. It is a core input into transport, logistics, agriculture, mining, manufacturing, and food distribution. Such a price level would move through the economy, raising the cost of moving goods, operating machinery, producing food, and keeping businesses running. The result would be significant upward pressure on the price of goods and services across the economy.

One possible consequence is that the fuel price shock causes the central bank to raise interest rates. Such a response would be largely futile, because the increase in prices would not be driven by the printing of money, reckless lending, or excessive domestic demand. Higher rates would, however, make debt more expensive for households and firms. That would place further pressure on consumers already facing higher fuel and transport costs.

Indicators show that markets now anticipate central banks may raise interest rates should oil prices hold at their current highs. That creates a second-round risk for South Africa. The first shock comes from higher fuel prices. The second comes if interest rates are pushed higher in response to inflation caused by those fuel prices.

The electoral consequences could be severe. Six months out from the November local government elections, a diesel price moving towards R40/litre would be just about the worst possible news for the ANC, in particular, which has haemorrhaged voter support for its mismanagement of the economy and the commensurate stagnation in living standards. The ANC might seek to answer that the current wave of price increases was driven by extraneous factors beyond its control, but the effect will be to suppress ANC voter turnout to the advantage of the opposition.

There is also a broader political consequence to put on the radars of South Africans and people who invest in the country, which is the risk of violent protest. Food price increases, especially in winter and amid populist agitation, are the formula that has sparked past outbreaks of mass protest action in the country, and all of those factors are starting to align. This does not mean that such a detonation is inevitable, just that the risk of it occurring is heightened.

Frans Cronje told The Common Sense, “Whether or not any of this plays out depends to a great extent on the evolution of the Iran war and specifically the question of getting the oil price back to US$100 or less. While the Americans have recently made progress in opening a shipping channel through Hormuz, the Iranians have responded with drones and missiles, draining confidence out of energy markets. The short-term outlook for the war is therefore fraught although it remains true that the interests of the US and China are both best served by a nearer-term exit point […] for which reason we are watching the Trump visit to Beijing in just over a week with great interest. Mr Trump needs to drop living costs in America to up his party’s midterm prospects […] and I am sure he would sorely love to report a win in the Middle East by the time Americans celebrate Independence Day on July 4th. Mr Xi will be aware of China’s vulnerability to burning through its limited oil reserves and what that means for the more brittle parts of its economy, although China has a few weeks to go before the risk there becomes acute. The war would need an earlier resolution, however, to spare South Africa the fuel price fallout that may now be on the cards.”