Global oil prices have dropped sharply since the end of the Iran conflict, but motorists across Africa are still paying high prices for petrol.
A memorandum of understanding between the United States and Iran has eased tensions in the Middle East, paving the way for the reopening of the Strait of Hormuz. As fears of supply disruptions faded, Brent crude fell from more than $110 per barrel in May to about $71, with some analysts predicting further declines.
While lower oil prices have brought relief to many parts of the world, African consumers are yet to feel the full impact.
In Nigeria, the Dangote Refinery has cut its ex depot price for Premium Motor Spirit (PMS) four times in one month. Despite the reductions, pump prices remain well above pre war levels. The same trend is playing out across several African countries.
The reason lies in a combination of expensive crude inventories, higher taxes introduced during the crisis, supply chain disruptions and structural weaknesses in Africa’s fuel market.
Why Dangote’s price cuts have not fully reached consumers
Dangote Refinery has reduced petrol prices by more than N200 per litre since late May, marking one of the fastest series of price cuts since fuel market deregulation.
However, the refinery says prices cannot fall immediately because petrol currently being sold was produced from crude purchased during the peak of the conflict when oil prices were significantly higher.
According to the company, it spent more than $4.48 billion buying crude in May and June. In May, it imported 21.47 million barrels at an average landed cost of $124.80 per barrel. That fell to $95.25 per barrel for 18.93 million barrels received in June.
Since refineries process crude purchased weeks earlier, lower international oil prices only reach consumers after cheaper crude has moved through the production cycle.
The refinery expects further reductions as lower cost crude replaces existing inventory.
Nigeria’s Federal Competition and Consumer Protection Commission (FCCPC), however, has argued that refiners, depot owners and marketers have not reduced prices enough, raising concerns about possible consumer exploitation.
African countries are still paying more for fuel
The impact of the Iran conflict continues to differ across African markets.
South Africa
Petrol prices increased by a combined R6.53 per litre between March and May as crude prices surged.
Although prices fell in July and further reductions are expected, petrol remains about R3.50 per litre above pre war levels.
Higher fuel costs have also pushed inflation expectations higher, prompting the South African Reserve Bank to raise interest rates.
Zimbabwe
Zimbabwe presents one of the clearest examples of why lower oil prices do not always translate into cheaper fuel.
Although Brent crude has returned to around pre war levels, petrol still sells for nearly $1.98 per litre compared with about $1.51 before the conflict.
The difference comes largely from higher fuel taxes introduced during the crisis. Those taxes remain in place, keeping pump prices elevated even as global oil prices fall.
Neighbouring countries including Zambia, Botswana and Mozambique now have significantly lower petrol prices.
Ethiopia
Ethiopia, which depends heavily on imported fuel, was among the hardest hit during the conflict.
Disruptions in the Strait of Hormuz caused fuel shortages, forcing motorists to queue for days while transport delays drove up food prices.
Although supplies have improved, many households are still dealing with the higher cost of living created during the crisis.
Why petrol prices fall more slowly than oil
Fuel prices generally rise faster than they fall.
When crude oil becomes more expensive, importers and refiners quickly pass those costs to consumers.
When prices decline, however, companies must first sell fuel produced from expensive crude before lower cost supplies enter the market.
Long term supply contracts, shipping costs and taxes also slow the decline in pump prices.
For many African countries that rely on imported fuel, supply chains are still adjusting after months of disruption.
Dangote Refinery’s disclosures highlight this challenge. Crude purchased at more than $120 per barrel cannot immediately become cheap petrol simply because Brent crude has fallen to around $71. The cheaper crude must first be purchased, shipped, refined and distributed before consumers benefit.
Bottom line
The agreement between the United States and Iran has removed much of the pressure on global oil markets.
If the peace holds and the Strait of Hormuz remains open, analysts believe oil prices could fall further, with some forecasting Brent could return to around $60 per barrel.
That would eventually lower petrol prices across Africa as refiners process cheaper crude.
However, the pace of the decline will also depend on government policy.
Countries that increased fuel taxes during the crisis may choose to keep them, limiting the benefit of lower oil prices. In Nigeria, regulators are monitoring the market for unfair pricing, while in South Africa policymakers remain focused on inflation.
Dangote Refinery is expected to play a major role in shaping fuel prices across West Africa as cheaper crude works through its system.
For now, though, millions of African motorists are still paying prices that reflect the cost of a conflict that has already ended.
