Motorists have welcomed a recent reduction in petrol prices, but economists caution that the broader effect on inflation is constrained by the significant tax component in fuel costs. Investec Chief Economist Annabel Bishop noted that inflation for December stood at 3.6 year-on-year, little changed from November, and is expected to remain steady in January before easing to 3.0 in March 2026.
The 65 cents per litre cut in petrol prices this week was driven largely by international petroleum price declines, which accounted for 37 cents, while the stronger rand contributed 28 cents. The rand strengthened to R15.76/USD at the end of January, from R16.51/USD earlier in the year, providing some relief to consumers.
Bishop explained that the rise in inflation at the end of 2025 was due to base effects from 2024, creating a high starting point for the first quarter of 2026. While inflationary pressures remain moderate, the heavy tax burden on fuel-already making up half of the price-means that another tax hike could limit the benefits of lower petrol costs. The situation underscores the delicate balance between currency strength, global oil prices, and domestic fiscal policy in shaping household expenses.
