Real price of fuel far lower than the current value
Petrol actually costs far less than the R12.96 charged for a litre of 93 fuel. So where is the rest of our money going?
Take into consideration, in April the cost of a litre of fuel was impacted by a 30 cents a litre increase in the Fuel Levy, announced by Finance Minister Pravin Gordhan during his budget speech in February.
This will move the Fuel Levy – a tax collected on every litre of fuel sold – from R2.55 to R2.85 a litre. The money collected through the Fuel Levy is administered by the National Treasury, and is treated as a general tax, not, as many people assume, road-related expenses.
For many, the fuel price is merely a number on a pump that they need to pay when filling their tank. But the cost of this essential commodity is much more than that. It is made up of many different costs that, together, constitute what is commonly referred to as the petrol price.
Also read: Techniques to improve fuel consumption
In South Africa this price is adjusted monthly based on a number of factors, mainly international petroleum prices, and the Rand / US Dollar exchange rate.
The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean area, Arab Gulf, and Singapore. These costs include insurance, storage, and wharfage, the cost to use harbour facilities when off-loading petroleum products into storage facilities.
In March 2016 for example these costs totalled R4.70 per litre for 93 unleaded petrol (inland).
Other costs associated with the petrol price include transport costs (from the harbour to other areas), customs and excise duties, the retail margins paid to fuel station owners, and secondary storage costs. Importantly, these other costs also include the Fuel Levy, and the Road Accident Fund (RAF) Levy.
In March 2016, these other costs totalled R6.76 (for inland users) per litre for 93 unleaded petrol. Of this, R2.55 was allocated to the Fuel Levy, and R1.54 was allocated to the RAF Levy. The Fuel Levy goes directly to the National Treasury, while the RAF Levy goes to the RAF, and is used to care for victims of car crashes.
This means that for every litre of petrol costing R11.46 in March, R4.09 (or almost 35 percent) is allocated to different government levies. In April this will increase to R4.39 per litre.
Look at the following infographic for a clearer picture of how fuel price is determined:
Using this formula, filling a 50 l tank with 93 unleaded petrol inland during March would have cost you around R573. Of this, R127.50 goes directly to the Fuel Levy with a further R77 going to the RAF Levy, giving a combined total of R204.50.
At the of April there was, however, also another slight increase in petrol, coupled with the fuel levy hike, which impacted motorists. Currently it is mainly the international petroleum prices, and the Rand / US Dollar exchange rate which has severely impacting the increase in fuel.
Get ready for a huge hike in petrol, diesel prices
* In the meantime, if South Africa’s petrol price continues to increase in line with historical trends, it could double in the next six years.
This is according to data compiled by trade union Solidarity.
Looking at historical petrol price data from 1976 to present, Solidarity senior researcher Paul Joubert calculated the average time it has taken for the petrol price to effectively double over the past few decades.
According to the research, the petrol price has doubled every six and a half years since the 1980s.
