Fears around global energy supplies have resurfaced following renewed hostilities in the Middle East and Russia’s suspension of seaborne diesel exports.
By Retief Ferreira, chief commercial officer at Energy Exchange of South Africa (EXSA)
While petrol will also be affected, substantial diesel hikes are set from August, which will significantly impact high-use industries such as transport, logistics, mining, and commercial agriculture – all of which will have substantial knock-on effects on consumer pockets.
Coupled with critically low global oil reserves and Eskom’s recent electricity price hikes, the case for renewable energy is glaring.
Business leaders must no longer classify energy as an operational cost, but rather a strategic risk to profitability and stability. And the most effective way to hedge against this risk is to reduce dependency on fossil fuels and lock in price certainty. By switching to affordable, predictable renewable energy solutions, businesses can build a defence against volatile, rising fuel costs.
Economic fragility threatens business sustainability
According to Stats SA, South African fuel prices climbed 34,3% over the past 12 months, reflecting increases of 50,8% for diesel and 31,7% for petrol, largely driven by the ongoing geopolitical war. This pushed our annual consumer inflation rate to 5%, its highest level in two years in June, up from 4.5% in May and above market expectations of 4,7%.
The environment created by energy input cost instability is severely destabilizing for businesses. Werkmans recently penned a note explaining that fuel is a uniquely systemic input, as it supports logistics, distribution, production, and service delivery across much of the economy. When it increases, the firm explains that businesses feel the pressure immediately through increased operating costs, as there is no wiggle room to defer without significant operational consequences. Conversely, when other operating costs increase, they can often be postponed for a period to buy some much-needed time for contingency plans.
The fuel shortage has hit in an environment where businesses already have limited liquidity cushions, exposing weaknesses and accelerating them quickly. In addition to this, price volatility derails effective planning. In this context, the risk of widespread insolvency and reduced competitiveness is very real.
Coupled with this, global strategic fuel reserves are low as countries tap into stockpiles to cushion current shortages. According to Central Energy Fund figures, South Africa holds approximately 8-million barrels of strategic crude oil reserves. This is roughly equal to two weeks of national consumption. Further, the CEF says we hold zero refined diesel in our strategic reserves, which breaches the legally mandated 60-day buffer requirement.
Internationally, other nations have also been cushioning the crisis using emergency reserves, with global stockpiles close to their lowest level in eight years. Depleted stocks signal a structural crisis that is likely to linger as countries, like South Africa, remain reliant on imports.
Renewables offer a practical hedge against energy constraints
While big business in South Africa is keenly aware of the risk of being dependent on diesel, moves toward alternatives have not always been quick enough. Current shortages have further exposed this vulnerability, highlighting the need for cost certainty wherever possible.
And the numbers make the case. With diesel costing upwards of R26 per litre from 1 August, and 9% increases on Eskom generated electricity, Irena Advisory cites that 85% of new renewable power is cheaper than fossil fuel alternatives – where solar power generation can be accessed commercially in some cases for below R1 per kWh.
Energy transition is therefore no longer an ESG cost to sleep easy at night, but a critical financial hedge. According to Eskom data, rooftop solar PV increased by 190% over three years to Dec 2025. And this was motivated almost exclusively by load shedding impacts, not environmental considerations.
Energy wheeling an attractive commercial tool
Critically for commercial businesses, energy traders offering renewable solutions that combine wind or solar with battery storage are increasingly able to offer reliable electricity supply and consistent pricing, often at a lower cost than most fossil fuel generation.
This is done through the process of energy wheeling, where companies buy customised solar and/or wind kWh and have it delivered across the grid to their sites, without the cost, risk and significant complexity of procuring it themselves. Wheeled energy from solar and wind producers – often with storage capacity – is bundled according to customised business needs to ensure a reliable power supply.
For big businesses that face direct production losses from Eskom outages and unpredictable supply, wheeling offers improved energy security and reduced operational risk.
In addition, it offers an increasingly important aspect: price certainty and competitiveness. Many energy traders and market participants attempt to achieve kWh rates substantially below Eskom/municipal industrial tariffs, with some case studies demonstrating that wheeled PPAs can be significantly cheaper. While this is contingent on how the PPA is negotiated, the business’s existing tariff band, and wheeling charges, savings of up to 15% are realised from the first year, with exponential growth over the PPA period – particularly as the gap between Eskom’s annual increases and CPI widens.
Critically, wheeling offers a solution to the current energy cost volatility by offering long-term protection against tariff creep. When companies sign a wheeling agreement, they secure steady energy costs during the contract period and protect themselves from unexpected price hikes approved by NERSA. This eliminates volatile fuel and tariff risks, giving CFOs a long-term planning horizon. Although recent tariff decisions suggest future increases might be less steep, ongoing financial challenges at Eskom make it unlikely that electricity prices will decrease.