Diesel shock exposes South Africa’s fuel fragility

South Africa’s diesel shock has turned a distant Middle East conflict into a domestic economic threat, exposing how sharply the country’s transport, mining, farming and power systems now depend on imported refined fuel.

The Iran war and disruption around the Strait of Hormuz have pushed global energy markets into a new phase of volatility, but South Africa’s vulnerability is not driven by crude oil alone. The deeper weakness lies in diesel, the fuel that moves freight, powers generators, supports mechanised agriculture and keeps mines, ports and construction sites operating. Data examined by economists at the Bureau for Economic Research shows the country entered the crisis with a heavier reliance on imported diesel than its public debate had generally acknowledged.

Diesel prices have risen far more sharply than petrol prices during the second quarter of 2026. Compared with the first quarter, diesel prices increased by almost 60%, while petrol rose by about 25%. That gap matters because diesel is embedded across the productive economy. A rise at the pump quickly feeds into food distribution, public transport, building materials, retail logistics and industrial output.

South Africa’s dependence has deepened because domestic refining capacity has shrunk. The country once relied on a broader base of refineries to process crude oil locally, but closures, fires, maintenance shutdowns and ageing infrastructure have shifted the supply model towards finished petroleum imports. Refining capacity has fallen by roughly half over several years, leaving the country with fewer buffers when global supply routes are disrupted.

The Middle East has become a particularly important source of diesel. It accounted for around two-thirds of South Africa’s diesel imports in 2024 and about 80% last year. That concentration left the country exposed when Iran’s actions around Hormuz strained tanker traffic and raised freight, insurance and replacement costs. The issue is not only whether ships can reach South African ports, but whether buyers with deeper pockets can outbid import-dependent economies for scarce cargoes.

Government has tried to cushion households and businesses through fuel levy relief. Petrol and diesel levy cuts were extended into May, with diesel receiving additional relief that temporarily reduced its general fuel levy to zero. The measure softened the full price shock but did not prevent steep increases. The official May adjustment lifted petrol by R3.27 a litre and diesel by R6.19 a litre, taking wholesale diesel above the R30-a-litre mark in parts of the market.

The fiscal cost is significant. Temporary levy relief from April to June is estimated at more than R17bn in foregone revenue. Treasury has said the measure will be funded without changing the fiscal framework, but the space for repeated intervention is limited. Relief is due to be halved in June and phased out by July, meaning households and firms could again face sharper pass-through if global prices remain elevated.

For South Africa’s economy, diesel is also tied to electricity security. Years of power cuts pushed businesses, hospitals, retailers, farms and households towards generators. Even as power supply stabilised in parts of 2025 and 2026, the installed generator base remains large. When grid uncertainty returns, diesel demand rises quickly, adding pressure to import needs and foreign exchange outflows.

Mining companies are also exposed. Diesel powers haul trucks, drilling equipment and support fleets across platinum, coal, iron ore and gold operations. Higher diesel costs squeeze margins, especially where global commodity prices are weak or rail bottlenecks force greater reliance on road haulage. The same pressure affects farmers, whose planting, harvesting and irrigation costs are sensitive to fuel prices.

The logistics sector faces one of the most immediate strains. South Africa’s rail underperformance has pushed freight onto roads, increasing diesel consumption and raising the cost of moving goods between ports, inland markets and neighbouring countries. Any prolonged spike in diesel prices risks feeding into food inflation and manufactured goods prices, particularly for low-income households already carrying high transport and electricity costs.