One of my earliest childhood memories is being bundled into the back of my mom’s white Volkswagen Beetle with my brother as we set out to the local garage to get some fuel. There was no fuel available, and we had to try a few locations before my mom pulled out her wallet and paid cash to fill up half a tank. Fast forward to the day before the petrol price increase on 1 April this year, and déjà vu: we could finally fill up at the third garage we found en route home.

Pre-1994

The South African economy has been at the mercy of international events affecting oil prices since the 1970s.

South Africa is a net importer of crude oil and refined fuels. Consequently, fluctuations in global oil prices consistently impact the economy through inflation, growth, fiscal pressure, and currency dynamics. Although policy frameworks have developed over time, this vulnerability has persisted since the 1970s.

The global oil crises of 1973 and 1979 coincided with international sanctions against apartheid South Africa, creating a severe external shock. Iran’s withdrawal as a major oil supplier and OPEC embargoes sharply increased import costs amid political isolation.

The economic effects included:

• Rising inflation driven by fuel and transport costs
• Balance of payments pressure
• Declining growth and rising unemployment
• Accelerated investment in synthetic fuels (Sasol) to reduce strategic dependence

Although higher gold prices provided temporary relief, the 1970s marked a shift from high-growth conditions to a long period of lower growth with structurally higher inflation.

Throughout the 1980s and early 1990s, South Africa was isolated, and oil price volatility led to stagnant growth and high inflation. We produced more synthetic fuel, but this did not protect the economy from global oil prices, and the manufacturing, transport, and agriculture sectors suffered. Inflationary shocks remained a persistent feature of the economic cycle.

Post -1994

After 1994, South Africa was reintegrated into global markets, which increased our exposure to oil price volatility.

The following factors now affect our economy:

• Monthly fuel price adjustments linked to international oil prices and the rand–dollar exchange rate
• Fuel costs have a direct impact on food and consumer inflation
• Heightened sensitivity of monetary policy to oil-driven inflation risks

Oil price stability has supported growth and interest rate cuts; oil shocks have consistently reversed these gains.

In recent decades, oil price shocks have been amplified by rand weakness, turning external price increases into domestic cost-of-living pressures. Fuel levies and administered prices further magnify the impact on consumers.

The result has been:

• Erosion of real household income
• Pressure on consumption — this has hovered around 60% of GDP
• Constrained growth and limited monetary policy flexibility

Strait of Hormuz

The current conflict represents the largest global energy shock since the late 1970s. Iran’s effective closure of the Strait of Hormuz, through which roughly one-fifth of global oil trade flows, has pushed oil prices above US$100 per barrel, with sharp increases in freight and insurance costs.

Implications for South Africa:

• Immediate fuel price spikes, particularly diesel
• Strong second-round inflation via food, transport, and logistics
• Downgraded growth forecasts
• Fiscal intervention via temporary fuel levy relief
• Renewed pressure on interest rates and the inflation outlook

South Africa’s limited strategic oil reserves render us vulnerable to prolonged disruption.

At the time of writing, a two-week ceasefire in the Iran conflict has been declared, and oil will hopefully be shipped through the Strait of Hormuz. Let’s hope that stability will prevail and that South Africa enhances its long-term resilience through improved energy security and reduced oil intensity.