Record diesel prices are on the cards for April, unless there is a drastic intervention in the next week.

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South Africans need to brace for impact as the fuel-price hikes in April have now reached unprecedented levels of very close to R9 per litre.

Not only will there be a direct hit at fuel stations on 1 April, but the aftershocks to the economy will probably push prices higher across the board as production and transport costs increase, potentially setting off a vicious cycle of higher inflation and even higher interest rates. At the very least, it might pause the rate-cutting trend indefinitely.

According to the latest data of the Central Energy Fund (CEF), the underrecovery on 95-octane petrol was R5.20 per litre for the three weeks up to 19 March. The “underrecovery” is the gap between local pump prices and the real cost of petrol at the moment, based on imported prices in dollar and the rand-dollar exchange rate.

For wholesale diesel with 0.05% sulphur, the underrecovery is R8.52 per litre, and for 0.005% sulphur, R8.63.

Fuel levies are also increasing by 21c per litre on 1 April. This would mean an increase of R5.41 per litre in the petrol price, and up to R8.84 per litre in the diesel price, which would take it to record levels.

But even with the expected increases, petrol will only reset to a level last seen in October 2023, almost three years ago.

Duncan Pieterse, deputy-general of the National Treasury, earlier this week told Bloomberg the government has very little leeway to soften the blow. Suspending the increase in the levy would be temporary and, in any case, be of very little real help compared to the huge underrecoveries.

In 2022, following Russia’s invasion of Ukraine, government temporarily cut its taxes by R1.50 per litre.

“Higher costs and shortages of supply of oil and petroleum products would negatively affect SA’s manufacturers, and input costs generally in the economy, with these the second-round effects the [Reserve Bank’s monetary policy committee] would be watching for from around mid-year,” Investec chief economist Annabel Bishop says.

She highlighted that petroleum-based inputs are used in a wide range of products - including fertilisers and other agri-chemicals, plastics, synthetic rubber and automotive parts, paints, detergents, pharmaceuticals, synthetic fibres such as polyester, industrial chemicals, solvents, gases and other petrochemicals - which will also be impacted.

Paraffin, which is not subject to any levies, would have to increase by a massive R10.58 per litre if prices had to change today.

There is still one week left during which the situation could improve – provided that the rand pulls back from recent lows, and the oil prices stabilise or fall a bit.

On Friday, oil steadied somewhat after Israel implied that the worst of the war on Iran was over. Prime Minister Benjamin Netanyahu said Iran no longer has the capability to enrich uranium or make ballistic missiles — “comments some interpret as a potential off-ramp the market has been looking for,” according to Nedbank analysts.

The rand was trading at R16.91/$ on Friday morning, from a low of R17.09 on Thursday. The local currency lost 5% of its value against the dollar in the first three weeks of the month, and contributed between 43c and 66c per litre to the underrecoveries in April’s fuel prices.

Concurrently, the price of Brent crude oil shot up by 52% during the three weeks, trading close to $120 per barrel on Thursday. It has closed above $100 per barrel for more than a week.

April’s fuel prices will be set on 26 March, and the changes will come into effect on Wednesday, 1 April.

95-octane petrol is currently sold for R20.30 per litre at Gauteng fuel stations, and for R19.47 at the coast.

Diesel with 0.05% sulphur is sold at about R18.34 per litre in Gauteng, and R17.71 per litre at the coast. Retail prices of diesel are not regulated.