Over the last decade, the price of Petrol in South Africa has doubled. In January 2012, 95 ULP was R10.61 a litre; now, it’s nearing R22 a litre. To understand that sharp and drastic increase, you should know how the South African petrol price is calculated. But, understanding how South Africa calculates the petrol price is beneficial in another way: it helps you identify when to expect another petrol price hike, helping you better prepare for what could be a devastating increase in prices rise as they have in the last three to four years.
Breaking Down The South African Fuel Price:
While it may seem like the government is trying to punish you each month for owning and driving a car by announcing an exorbitant petrol increase, the truth is more goes into the cost of petrol than just the RAF and general fuel level.
General Fuel Levy
According to data released by the Department of Mineral Resources in December 2021, the petrol price is 19% general fuel levy. In 2021, the General Fuel Levy was R3,93 for every litre of petrol and remained unchanged in 2022.
While many drivers believe the general fuel levy goes toward road management and upkeep. That’s not the case. Instead, the levy is a general tax that brings the government R80 billion in revenue annually. This figure is more than custom duties or excise duties from tobacco and alcohol.
Road Accident Fund Levy
The Road Accident Fund equates to 11% of the amount you pay for petrol and also remains unchanged at R2,18 a litre in 2022. The levy generates R41.2 billion for the RAF and accounts for 99.5% of the fund’s income. However, all of the money goes to claims and operating the fund.
Although it doesn’t account for as large a chunk as the general fuel levy, it has increased by 425% in the last 14 years, outpacing both the general fuel levy and the basic fuel price.
Basic Fuel Price
While levies always get the brunt of motorists’ anger, the true determiner of the petrol price is the Basic Fuel Price (BFP). This price is outside the South African government’s control and accounts for 48% of the petrol price.
The BFP is based on the spot prices of two markets: the Mediterranean and Singapore. This figure is quoted in USD. From there, it is converted to South African rands daily at the dollar-rand exchange rate at 11:00 am South African time.
Storage and Transport Costs
Calculated in the price of petrol in South Africa is the cost of storing and transporting petrol. Considering the petrol’s flammable and toxic nature, it’s unsurprising that storage and transport costs would be calculated in the price.
This price is dictated by South African markets as the country’s fuel is stored at the coast and transported by South African companies.
According to data released by the Department of Mineral Resources in December 2021, these costs amount to R1,16 or 11 percent of the petrol price.
Then, of course, the retailers that sell petrol need margins to cover the overhead of selling fuel to consumers. Margins that help pay for infrastructure, fees, cost of labour, and so on. Currently, these margins equate to 14% of the petrol price or R2,74.
Dollar/Rand Exchange Rate
Since commodities, like oil, are acquired in USD, the dollar-rand exchange rate also significantly impacts how much we’ll pay at the pump.
The petrol we acquire in dollars will need to be multiplied by the current dollar/rand exchange rate. For that reason, when the dollar strengthens, or the Rand weakens, the price of acquiring fuel increases, which means the price of petrol increases.
But when the opposite happens — the dollar weakens, or the Rand strengthens — we can expect petrol prices to decrease.
Does Brent Crude Matter in the Price of Petrol?
Motorists seem to become upset at much more than the dollar/rand exchange rate and levies. Another component that you’ll always hear during the discussion of petrol prices is the cost of Brent crude or — more recently — OPEC.
These aspects play a part in the price of fuel on the international stage, so they don’t just affect the price of Petrol in South Africa but around the globe.
The price of Brent crude is dictated by a handful of oil-producing nations known as OPEC. These nations can, and have, reduced supply to artificially increase prices, often using their oil production influence as bargaining chips with countries like the United States.
Since South Africa relies on the Brent crude benchmark based on the oil production of OPEC nations, when Brent crude increases, so does the country’s petrol cost.
But the effects may not be immediate as South Africa still stores oil on its shores. For that reason, fluctuations in Brent Crude oil can be delayed by one or two months.
How Can You Spend Less Money on Petrol in South Africa?
The most likely reason you’re reading this is that you want to know how to reduce the amount you spend on petrol every month. As a consumer, there’s not much you can do to affect the price of petrol, so you’re only left with one solution: use fuel efficiently.
Beyond purchasing a fuel-efficient car, you can also choose to drive efficiently, avoiding stop-start traffic and even turning off your engine in bumper-to-bumper traffic.
You’ve probably already heard about lift clubs. But, while you may not enjoy the prospect of sitting in someone else’s car or chauffeuring people around in your own car, splitting the cost of petrol two, three, or even four ways can make travelling to work so much cheaper.
In the last 20 years, not much has changed concerning how the price of petrol is calculated in South Africa. Therefore, if you understand how this liquid gold is priced, you can predict with almost 100% accuracy where the petrol price will go, which will hopefully help you make contingency plans.
If you want to know where the price of fuel could be in the next two or three years, you should shift your focus from the RAF and focus on the BFP and Dollar/Rand exchange.