Fuel Price Breakdown: What do you pay for?

Petrol

The recent fuel price increases have hit South African motorists hard, but it’s also worthwhile knowing and understanding the cost breakdown of every litre of petrol you purchase. Take a look at this petrol price breakdown for further insight…

In an effort to educate and inform the public regarding the cost of fuel, the Automobile Association of South Africa (AA) has provided a comprehensive price breakdown for a litre of petrol (inland and coastal) while also highlighting where the money is being allocated.

The figures presented here are based on 93 unleaded octane fuel (inland) and 95 octane fuel (coastal).

As you know, fuel prices in April 2018 rose by 69 cents and 72 cents per litre as a result of increasing international petroleum prices and an increase in fuel levies, the latter of which was announced in former Finance Minister Malusi Gigaba’s Budget Speech earlier this year and came into effect this month.

Previously, the AA warned that the increases would have a severe effect on poor South Africans who rely on public transport which, if the price of fuel increases, will need to recover these costs by passing them on to consumers. It’s also worth noting that increasing fuel prices also affect the cost of transporting goods and consumers are impacted as operators seek to recover increases by passing the cost onto consumers.

Not only are consumers faced with increasing fuel costs and more expensive goods, but the recent VAT increase from 14% to 15% is another hard blow for an already heavily-burdened public.   

Fuel Price Breakdown in SA

There are 4 main elements that constitute the fuel price you pay at the pumps and they are as follows:

  • General Fuel Levy

  • Road Accident Fund (RAF) Levy

  • Basic Fuel Price (freight and insurance costs, cargo dues, storage and financing)

  • Wholesale and retail margins, distribution and transport costs

The General Fuel Levy is a tax charged on every litre of petrol sold. This year, the General Fuel Levy increased by 22 c/l and is now at R3.37 per litre. This tax is administered by the National Treasury and is considered to be a general tax and not used for road-related expenses as many people assume.

The RAF Levy funds the Road Accident Fund which is used to compensate victims of road accidents. In 2018, the RAF Levy increased by 30 c/l and now accounts for R1.93 of every litre of fuel sold.

Combined, the RAF Levy and the General Fuel Levy account for R5.30 of every litre of fuel sold. That means that if a litre of 93 Octane (inland) costs R14.23 per litre, then 37% of this amount constitutes tax. Similarly, if 95 Octane (coastal) costs R13.89 per litre, then 38% is attributable to tax. The difference between inland and coastal fuel prices is mainly due to transport costs of the fuel from depots at the coast to inland outlets.

The fuel price is adjusted monthly based on a number of factors but international petroleum prices and the Rand/Dollar exchange rate are major contributing influences.

The Basic Fuel Price (BFP) is based on costs of shipping petroleum products to South Africa from areas such as the Mediterranean, Arab Gulf and Singapore. Typical costs include insurance, storage and wharfage. The current Basic Fuel Price is R5.81.

Other costs that influence the fuel price include transport (harbours to inland), customs, excise duties, retail margins and secondary storage costs. These costs currently account for R3.12 (inland petrol) and R2.78 (coastal petrol). Over the past 12 months, the cost to transport fuel from the coast to Gauteng has increased by 10 c/l while retail margins at the coast and inland have increased by 11 c/l.

“Depending on whether the BFP increases or decreases during April going into May, a calculation that still needs to be done, the price of a litre of petrol could either increase or decrease. However, given the current increased international petroleum prices, and the volatility of the Rand against the US Dollar, it is likely the price of a litre of petrol will increase, in the short term at least” concludes the AA.

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