50% fuel levies! Why SA doesn’t enjoy the full effect of low oil prices

JOHANNESBURG – Plummeting international oil prices have resulted in some much-needed fuel price decreases for South Africans in recent months, with Covid-19 having given oil markets a Chuck Norris-style roundhouse kick. 

Sadly, oil prices are on the way up again but even following the recent rises, Brent crude is still fairly cheap in historical terms, trading at $36.70 at the time of writing. Consider that this sludgy stuff hit $80 less than two years ago.

But putting next month’s inevitable price hike aside or a moment, the sad reality is that today’s fuel prices reflect international oil prices at the bottom of the curve, and more than three times lower than they were at the top of the last peak in 2018, and yet fuel is not three times cheaper at the pumps.

This can be partly explained by the South African rand having lost significant ground to the US dollar in the last year. However, the biggest culprit are the levies that increase each year, accumulating to a level that would make any motorist feel disgruntled the next time they fill up.

Currently there are two levies imposed on South African fuel prices, the General Fuel Levy (GFL) and the Road Accident Fund levy (RAF). To give us more perspective into the fuel price situation, the Automobile Association has compiled a price breakdown using coastal 95 Unleaded petrol and inland 93 Unleaded.

According to the AA, the GFL currently accounts for 32% of the coastal petrol price and 31% of the inland cost. The RAF levy adds a further 18 and 17% to the coast and inland tally respectively. 

In total, fuel levies make up 50% of the petrol price at the coast and 48% of the inland price. 

That’s R5.84 for every litre of petrol you put in your car!

South African fuel price breakdown

In addition to the basic fuel price, there are also freight and insurance coasts, cargo dues, storage and financing as well as transport costs and wholesale and retail margins.

“South Africa’s fuel price is comprised of many different elements, some of which make fuel in the country more expensive than that in neighbouring countries to which South Africa exports,” the AA said. 

The association also warned that the record decreases that we saw in April and May are unlikely to be seen soon again, if ever.

“With economic activity slowly beginning to pick up worldwide, the cost of international petroleum is expected to also slowly increase. This will have a knock-effect on local prices which will also steadily increase.”

South Africa’s fuel prices are adjusted on the first Wednesday of each month, based on the previous month’s oil price and rand data. The levies, however, remain the same throughout the year, with increases generally coming into effect every April following the country’s annual Budget Speech.

IOL Motoring