Destroyed refineries will keep fuel prices high long after war: SARB

The South African Reserve Bank (SARB) has warned that the destruction of oil refineries due to geopolitical tensions will maintain high fuel prices for an extended period, even after the conflicts subside. The bank released its October 2026 Monetary Policy Review (MPR), which delves into both local and international economic developments influencing domestic monetary policy.

Inflation continues to sit above the target level, and ongoing conflicts in the Middle East, coupled with attacks on energy infrastructure during the Russia-Ukraine war, pose risks of persistent high fuel prices. Other concerns raised include potential food price surges due to El Niño, rising inflation expectations, and the possibility of the South African rand losing value due to tightening monetary policies in advanced economies.

The SARB's primary focus now is to prevent a temporary inflation surge from becoming entrenched and to bring inflation back to the 3% target. South Africans are currently experiencing higher fuel prices, with a litre of petrol reaching R30 on Wednesday. The bank has expressed serious concern over the surge in diesel prices and the significant impact fuel prices have on inflation expectations.

Fuel inflation has increased by nearly 25% in the second quarter of 2026. Global inflation is expected to remain high, reaching 4.4% in 2026, with the outlook influenced by renewed tensions in the Middle East. Chief Economist at the South African Reserve Bank, Konstantin Makrelov, emphasized that the issue extends beyond oil prices and highlights the increased refinery margins resulting from destroyed refining capacity and constrained export of refined products.

Even if oil prices decrease, fuel prices are likely to stay elevated due to decoupling between refinery margins and oil prices.