As the price of petrol continues its upward movement, South Africans are becoming increasingly concerned about the financial impact of rising fuel prices. A rising petrol price doesn’t only put pressure on your budget when you fill your tank – it also raises the cost of products because retailers and wholesalers have to pay higher transport fees. Every month we queue at garages the night before a price change, hoping that there will be sufficient fuel to fill our tank.
As consumers knuckle down and prepare to deal with the effects of a higher petrol price, a great number of South Africans are not aware that the price paid at the pump is not just the cost of fuel plus a mark-up added on by the garage – the petrol price includes a number of taxes, levies, and other charges which all road users should be aware of. Here is a summary of the South African petrol price:
The Basic Fuel Price and State Levy – 53.1%
This amount is the cost involved in importing the fuel from refineries in the Mediterranean, Singapore, and the Arab Gulf, and includes a number of charges such as shipping, taxes and down payments which have to be paid by oil importers in order for the petrol to arrive on South African soil. Since this component makes up just over half the petrol price, the rest is accounted for by the following domestic charges:
• Tax (27.9%) – This amount of money is tax which is paid directly to the SA government. It includes customs duties, Road Accident Fund contributions and the basic fuel tax.
• Wholesale Margin (7%) – This amount is paid to the oil company which supplies the petrol to cover marketing costs.
• Retail Margin (8.4%) – This is the mark-up applied by the retailer (usually a chain of filling stations).
• Transport Costs (2.4%) and Delivery Cost (1.2%) – These costs occur when the petrol is transported from one of South Africa’s harbours to your local filling station.
From these numbers, it becomes clear that the biggest cause of expensive fuel in South Africa, besides the basic cost of oil, is the sizeable taxation which is paid to the government. Although these taxes pay for the Road Accident Fund, the price of fuel could be reduced if a lower tariff were applied, easing the burden on South Africa’s road users. Are there opportunities to reduce the price? Of course there are! All you have to do is convince Ministry of Finance to spend less.