It looks as if fuel-price relief will be a very long time coming. Higher government fuel tax and levies, combined with political unrest in Libya and the Middle East means that motorists are paying the cost. Speculation on oil futures hasn’t helped either.
As we know, 93 unleaded petrol has increased to R9,81 a litre and 95 unleaded to R9,96 a litre in Gauteng. Prices in places like Gordonia, Namakwaland and Thohoyandou are now looking at more than R10 a litre.
This isn’t as arbitrary as it sounds as the price of petrol is regulated by the Minister of Energy, so each element of the price, as well as the final price charged at pumps, has to be approved by the minister. The petrol price at all retail service stations in a pricing zone must be similar and there are no discounts.
The petrol price is also announced in the Government Gazette each month before a price adjustment. Price adjustments always occur on the first Wednesday of a month and the administration of the petrol price adjustments are done by the Central Energy Fund (CEF) on behalf of the Department of Energy (DoE).
Why the price of crude oil matters
As the major input cost for petroleum refineries, the price of crude oil has the largest impact on the cost of petrol at the pumps. Currently at over $100 per barrel, the price of crude oil has recently increased, largely as a result of market reaction and speculation to political unrest in Libya and the Middle East, major oil producing regions.
Even though the Rand/US Dollar exchange rate — an important factor on the local fuel price — strengthened to 6,9512 between 25 February and 31 March compared to 7,2334 during the previous period, this has been offset by a higher increase in the price of crude oil.
“The two main factors that have affected this month’s price increase are the ongoing political unrest in Libya and the Middle East and speculation on oil futures,” says Avhapfani Tshifularo, executive director of SAPIA. “This has been compounded by new government levies and taxes implemented by the Department of Energy.”
Based on the most recent government budget, the fuel levy has increased by 10,0 c/l to R177,50 c/l and the Road Accident Fund Levy will increase by 8,0 c/l to 80,000 c/l; both applicable to petrol and diesel prices only. The fuel levy goes to the National Revenue Fund and is used to fund various government programmes and the Road Accident Fund Levy has been put in place to compensate third-party accident victims.
As of Wednesday, the price of fuel will also be impacted by revised pipeline tariffs for inland transport of petrol, diesel and jet fuel, as set by the Department of Energy. Transportation costs between the so-called Magisterial District Zones (MDZs) are set according to different distances petroleum products must travel from South Africa’s harbours to these MDZs. For example, as of Wednesday, the transport costs for petrol to coastal areas will be 0,8 c/l, while it will be 7,4 c/l for Gauteng.
According to Tshifularo, our prices are still competitively priced within the continent; but market speculation means petrol, diesel and paraffin prices are going to be elevated for quite some time to come.
So what makes up the price of fuel?
Over 80% of the price of fuel in South Africa is currently made up of government levies and taxes (29%) and the BFP or Basic Fuel Price (55%). The BFP is mainly based on the spot prices quoted daily on international markets. The remaining components (all regulated) that make up the price of petrol are transportation costs and industry margins.
“The price of fuel in South Africa is based on a formula overseen and administered by the Department of Energy on a monthly basis,” says Tshifularo. “It is important to understand that the overall price paid for fuel at the pumps is not determined by South Africa’s petroleum refining and marketing companies.”
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