South Africa last experienced a real shock in liquid fuel prices during the Russia-Ukraine war in 2022, which triggered record oil prices and exposed the country’s deep import dependency
South Africa’s response to fuel price shocks should be better targeted. A more equitable approach would shield vulnerable households first — not subsidise the biggest fuel consumers.
According to Fatih Birol, executive director of the International Energy Agency, the world is facing an energy crisis worse “than two major oil shocks put together”. For South Africa, a country deeply dependent on imported liquid fuels, that warning carries particular weight. When fuel prices spike, governments face intense pressure to act fast — but how relief is designed matters as much as whether it is provided. South Africa’s default response overwhelmingly benefits wealthier households and fuel-intensive industries, while leaving the most vulnerable behind.
To understand how the current fuel crisis might play out, we should learn from previous experiences. The last time South Africa experienced a real shock in liquid fuel prices was during the Russia-Ukraine war in 2022, which triggered record oil prices and exposed the country’s deep import dependency. Measures to shield consumers from high prices were applied from 1 April to 3 August 2022, costing the fiscus R10.5 billion in foregone tax revenue in that financial year. However, this amount was less than a quarter of the R47.4 billion in forgone revenue over the same period from the VAT zero-rating on liquid fuels and the diesel refunds that are provided as a subsidy measure to certain industries and producers.
However, no short-term remedies were applied to illuminating paraffin and liquefied petroleum gas (LPG), both of which are critical fuels for cooking and heating in many low-income households. As of 2023, about 2.5% of households, including some of the poorest, used illuminating paraffin and about 6.8% used LPG. Paraffin use for cooking was particularly high in Gauteng, Eastern Cape and Free State.
History is now repeating itself — and the same blind spots remain. In 2026, the global fuel price shock caused by the conflict in the Gulf has led to substantial rises in regulated fuel prices effective 1 April 2026. Petrol rose by R3.06 a litre, diesel by R7.37 to R7.51 a litre, and illuminating paraffin by R11.67 a litre at wholesale level. Paraffin prices nearly doubled, hitting low-income households hardest. For May, petrol is set to rise by R2.04 a litre, diesel by R4.96 a litre and illuminating paraffin by R4.21 a litre.
The treasury responded with a temporary R3.00-a-litre tax reduction for petrol and diesel, effective from 1 April to 5 May 2026, which has now been extended to 2 June 2026. This reduced the general fuel levy on petrol to R1.10 a litre and on diesel to about R0.93 a litre, at an estimated fiscal cost of about R6 billion for one month. Yet once again, paraffin and LPG — the fuels that low-income households depend on most — received no tax relief whatsoever, even with the recent price increases for May. The households hit hardest by the crisis were left entirely outside the government’s response.
The real economic effect of fuel price rises
Fossil fuel price changes often have a domino effect across all sectors, with the inflationary effect felt most strongly by the poorest, who spend the highest proportion of their income on basic food and energy needs. An analysis by TIPS found that the richest 10% of households receive 70% of total income, while the poorest 30% receive only 4%. On public and shared transport, the poorest spent R3 000 per annum, while the richest spent only R2 000. Food accounted for more than 30% of total expenditure in the lowest income decile versus only 8% in the highest. By contrast, the richest 10% spent 55 times more than the poorest 30% on private vehicles, including fuel. The Cost of Living Report by the Competition Commission found the poorest households allocate 5.5% of income to electricity and, over the past six years, electricity prices have surged by 85% compared to overall inflation of 30%
How to respond more fairly to price shocks
Cutting taxes on petrol and diesel can look like a simple way to soften inflationary pressure, but it is a very inefficient tool. Broad-based relief tends to favour higher-income households and fuel-intensive sectors. When pump prices are lowered for everyone, the biggest total subsidies go to the largest consumers — those who drive more and use more energy. Across middle-income countries, the highest-earning 20% receive about eleven times more in fuel subsidies than the poorest groups.
Targeted cash transfers could work to protect buying power for those who need it most, without weakening national revenue streams and price signals that encourage energy efficiency or the switch to clean energy alternatives.
Another option is to temporarily subsidise the fuels that are used most by the poor. Priority should be given to consumers of fuels such as paraffin and LPG to provide relief to low-income households — who are most vulnerable to price shocks — and measures must be carefully designed and implemented.
In the longer term, a transition to EVs is one possible effective solution to South Africa’s fuel import dependence. However, the diesel refunds mentioned above reduce the attractiveness for energy-intensive industries to adopt more energy-efficient practices or transition towards electric vehicles (EVs). Without a level playing field for EVs, electric transport is less likely to reach economies of scale.
In the long run, industrial policy and tax reforms must reduce South Africa’s reliance on volatile, geopolitically risky imported fuels. Shifting from paraffin to locally generated renewables paired with induction stoves would lower vulnerability to global disruptions. These solutions cannot be implemented overnight — but every crisis that passes without a credible plan is a missed opportunity. The households who saw their paraffin bills nearly double this April cannot afford another one.
Bathandwa Vazi is a policy advisor and Richard Bridle is a senior advisor, both at the International Institute for Sustainable Development (IISD).
