Fuel is now the economy’s weakest link

There are moments in history when the global economy shifts gradually – almost imperceptibly. Then there are moments when it lurches violently and everyone feels the impact at once. This is one of those moments…

This month’s issue is dominated by a single, unavoidable reality: fuel is no longer just a cost of doing business. It has become a defining constraint on economies, industries and livelihoods.

What we are witnessing is not simply another round of fuel price increases. It is a global energy shock – triggered by geopolitical conflict – that is cascading through supply chains, distorting markets and reshaping economic expectations. As Katrin Bennhold recently observed in The New York Times, the current crisis is already being compared to (and in some respects exceeding) the oil shocks of the 1970s. Across the world, governments are rationing energy, curbing consumption and fundamentally altering how societies function.

And yet, this crisis did not emerge from nowhere. As John Stupart recently wrote in The Daily Maverick, the war in Iran has been “a colossal waste of lives and resources… with the consequence being that we all now pay an absolute fortune more for petrol”.

“The US just speed-ran a strategic defeat against a militarily inferior opponent, with the consequence being that we all now pay an absolute fortune more for petrol, and if you drive a diesel car, you’re starting to look at bicycles on Takealot,” he noted.

The crazy thing is that this could all have been avoided. Instead, the whole world is now dealing with the fallout.

From conflict to cost

The mechanism is brutally simple: when conflict threatens key oil-producing regions and shipping routes – particularly chokepoints such as the Strait of Hormuz – markets respond instantly. Risk premiums are priced in. Supply fears escalate. Prices spike. Those increases filter rapidly through to fuel-importing countries like South Africa.

Sharmini Naidoo captures this dynamic succinctly in this month’s brilliant Step Ahead column (see page 18), noting that global tensions in the Middle East are “sending shockwaves through oil markets, with direct consequences for South Africa”. The numbers tell the story: Brent crude surged dramatically, disrupting a system already under pressure.

For South Africa, the consequences are amplified by structural realities. We are heavily reliant on imported crude oil and refined products, meaning any movement in global prices feeds quickly into the domestic economy. There is no buffer; there is no insulation. Very quickly, the global issue becomes a local one.

Johann Els, chief economist at PSG Financial Services, explains that higher fuel costs function “like a tax” – and it is an unavoidable one. Consumers must spend more simply to move. Businesses must absorb higher logistics and production costs. The result is a squeeze on disposable income, rising inflation and a more constrained economic outlook.

A shock on 1 April

But while the macroeconomic implications are significant, they can sometimes feel abstract. The reality on the ground is far more immediate. On 1 April – a date that feels almost cruel in its irony – the daily basic diesel cost rose by 32.5%. This was not a marginal adjustment, but a seismic shift applied to a cost input that already accounts for between 35 and 55% of total operating costs in road transport.

This is not a price increase. It is a structural shock, and it is hitting the transport sector hardest. That’s because diesel is not just another line item on a balance sheet. It is the foundation on which the entire logistics system rests. When diesel prices move, everything moves with them.

On page 8 of this issue, the Southern African Bus Operators Association (SABOA) highlights the direct impact, noting that “every cent increase translates into significant operational strain”, with immediate consequences for fares, delivery costs and access to essential services.

The Road Freight Association is even more direct: “Road freight operators are under immense pressure. There are no guarantees that clients will pay the new transport rates – and transporters are in the business of making money, not in the business of making a loss,” notes its CEO Gavin Kelly.

A system under visible strain

Lightstone Retail’s data (see page 38) reinforces just how severe the situation has become. According to the company, fuel demand surged for 12 consecutive days in March. This was not random behaviour. It was a rational response to anticipated price increases. Operators filled tanks early, concentrated demand and placed additional strain on an already pressured system.

At a structural level, the implications are even more concerning. The latest SAAFF analysis (see page 34) makes it clear that fuel is no longer simply a cost variable. It is becoming “the central constraint on trade, logistics and broader economic performance”.

Africa feels the heat

Across Africa, the story is the same. Most countries are experiencing sharp increases in fuel prices, exposing a continent that remains deeply dependent on imported energy. As one report notes (see page 37), many economies are still “at the mercy of global events” beyond their control. South Africa is no exception.

We are part of this system. We are exposed to its vulnerabilities. And perhaps that is the most uncomfortable truth of all. Because, while the immediate cause of this crisis is geopolitical conflict, the severity of its impact is shaped by our own structural weaknesses: limited refining capacity, heavy reliance on imports, logistics inefficiencies… a system that has long operated with little margin for error.

Fuel prices have not created these problems. But they certainly have exposed them.

The tipping point is real

The language used in this issue is telling. Words like “tipping point”, “constraint” and “chokehold” are not used lightly. They reflect a growing recognition that the current situation is not temporary. It is a stress test – one that is revealing just how fragile parts of the system have become.

Yet despite the severity of the moment, there is still a tendency to treat fuel price increases as cyclical – something that will pass; something that can be absorbed. That’s not a very wise approach – because fuel isn’t just another input cost. It is a multiplier that amplifies inefficiencies.

The cost will not stop at the pump

From Asia to Europe to the Americas, countries are grappling with the same underlying issue: energy volatility is reshaping economic realities. South Africa’s position is complex. There are mitigating factors – commodity exports, for example, provide some buffer during periods of global uncertainty – but these are partial offsets, not solutions.

The fundamental challenge remains: we are deeply integrated into a global system over which we have limited control. When that system is disrupted, the effects are immediate and unavoidable. The fact of the matter is that our transport sector is now bleeding, and when transport bleeds, the economy follows – because almost everything moves by road. When the cost of movement increases, the cost of everything increases.

This is the real price of fuel. It is not measured only in rands per litre. It is measured in slower growth, higher inflation, reduced competitiveness and increasing pressure on businesses and households alike. Unless something changes, that price will continue to rise.

Things aren’t looking good. As I pen this column, President Donald Trump has said the US Navy will start preventing ships from passing through the Strait of Hormuz. If this happens (who knows if he will back down or not), we could see an even greater spike in oil and gas prices. Quite frankly, the situation is scary. Fuel has long been described as the lifeblood of trade. Today, it is becoming its chokehold.