PETROL PRICES

[Phillip Coetser]

Hi guys, Phillip.
This is a topic that affects us all as motorists. In the coming months, we as motorists are going to cough up a lot more money to do our daily chores. This morning, the AA predicted a possible increase in the petrol price for May 2018 of 49cents per litre of 93 octane, and 60cents per litre of diesel. Tough times ahead. So then, why do we have to pay so much money for fuel? Below is a explanation of how the fuel price is calculated, and I quote,

To understand how the fuel price is comprised, the Automobile Association (AA) has published a fuel price breakdown, providing a snapshot of how the cost of petrol both inland, and at the coast, is determined.

These figures are based on 93 unleaded octane fuel (inland) and 95 octane fuel (coastal).

At the beginning of April road users across the country paid between 69 cents and 72 cents more for a litre of fuel at the pumps. This increase was due to a number factors: strengthening international petroleum prices, and the addition of 52 cents to the fuel levies, the association said.

These fuel levies are mainly in the form of two indirect taxes: the General Fuel Levy, and the Road Accident Fund (RAF) Levy. The increases to these levies was announced by former finance minister Malusi Gigaba in his Budget Speech in February, but only came into effect at the beginning of the month.

An important factor to consider is that increases to fuel prices means goods transport across the country also become more expensive as operators seek to recover the increases by again passing these on to consumers.

“Essentially, in our view, more expensive fuel means more expensive transport and goods for consumers, who this year, are also faced with a one percentage point increase in the Value Added Tax (VAT) rate,” the AA said.


The fuel price is comprised of four main elements:

•The General Fuel Levy;
•The RAF Levy;
•The Basic Fuel Price (freight and insurance costs, cargo dues, storage and financing);
•Wholesale and retail margins, and distribution and transport costs.


The General Fuel Levy is a tax charged on every litre of petrol sold. In April 2016, the General Fuel Levy increased from R2.55 to R2.85. Last year, this levy again increased by 30 cents from R2.85 to R3.15.

This year it increased by 22 cents and now stands at R3.37 a litre, the AA noted. The money collected through this tax is administered by the National Treasury, and is treated as a general tax and not, as many people assume, for road-related expenses.

Regards