Fuel price explainer: How is the petrol price determined? [VIDEO]

Despite the last two months’ welcome cuts in petrol and diesel prices, South African motorists have been paying more than R20 per litre of fuel for well over two years now. This as the government levies and taxes imposed on fuel continue to escalate.

Since 2021, both the General Fuel Levy (GFL) and the Road Accident Fund (RAF) levy have increased by about 5%.

The levies and taxes pose a scenario of a double-edged sword as state coffers benefit billions from the additional charges on fuel prices every year.

Ramaphosa announced fuel price formula review

In his Opening of Parliament Address on 18 July 2024, President Cyril Ramaphosa said the fuel price formula will be reviewed to identify where petrol and diesel prices can be reduced.

Petrol and diesel price factors

South Africa’s fuel price is calculated according to the following factors:

• The General Fuel Levy.
• The Road Accident Fund levy.
• The basic fuel price, including freight and insurance costs, cargo dues, storage and financing.
• Wholesale and retail margins; distribution and transport costs.

Budget Speech: Fuel and RAF levies

Increases in the General Fuel Levy and the Road Accident Fund Levy are announced in the annual Budget Speech.

With effect from 3 April 2024, the fuel levy in the price structure of petrol and diesel increased to R3.96/litre and R3.84/litre, respectively.

The RAF levy funds the RAF, which provides compensation to people under the age of 75 involved in vehicle accidents. This levy remained at R2.18/litre for both petrol and diesel.

During his 2024 Budget Speech, Finance Minister Enoch Godongwana announced increases to the carbon fuel levy of one cent per litre on petrol and three cents per litre on diesel.

Rand/dollar and global oil prices

Petrol and diesel price changes are implemented on the first Wednesday of every month and are determined by two main factors:

• The Rand/US Dollar exchange rate, which determines how fuel is purchased.
• Global oil prices, which determines how much the fuel costs to purchase.

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