The next fuel price adjustment lands on Wednesday 4 November, the same day South Africans vote in the local government elections. This time Treasury has stepped in with a temporary cut to the fuel levy. To understand what that does to your tank, it helps to know how the pump price is built in the first place.
Step one: the Basic Fuel Price
South Africa prices fuel as if it were all imported, even when some of it is refined here. The Department of Mineral and Petroleum Resources (DMPR) calls this “import parity”. As SAnews explains, the petrol price is linked to US dollar prices quoted at refining centres in the Mediterranean, the Arab Gulf and Singapore.
The Basic Fuel Price, or BFP, adds up what it would cost to land that fuel in a South African port:
- the product price at the overseas refinery
- freight to South Africa, adjusted monthly
- insurance and an allowance for losses at sea
- harbour charges, coastal storage and the cost of financing stock
That dollar figure is converted into rand per litre. This is why the pump price moves with two things you cannot control: the oil price and the rand.
Step two: the local costs
On top of the BFP come domestic costs, which differ by zone. That is why inland drivers pay more than coastal drivers. They include:
- inland transport by road, rail and pipeline
- a regulated wholesale margin and a regulated retail margin for service stations
- the General Fuel Levy, a tax on every litre that goes to general government spending
- the Road Accident Fund levy, which pays compensation to road accident victims
- the carbon fuel levy and customs and excise duties
Step three: the slate and the monthly adjustment
The BFP is recalculated every day, but the pump price changes only once a month. Each day, the department compares the daily BFP with the BFP already in the price. If the daily figure is higher, motorists are paying too little that day, an “under-recovery”. If it is lower, they are paying too much, an “over-recovery”. Those daily gaps are averaged over the month and become the next adjustment. A separate slate levy can be added to cover a negative balance in the slate account.
When you read that petrol has an “under-recovery of R1.27”, it means the month’s numbers point to an increase of roughly that much at the next adjustment.
Where prices stand now
According to the Fuels Industry Association of South Africa, 95 unleaded has cost R30.25 a litre in Gauteng and R29.38 at the coast since 7 October. Wholesale 500ppm diesel is R31.95 inland and R31.08 at the coast.
The latest projection on EconoEnergy’s tracker, based on Central Energy Fund data from 22 October, pointed to increases of about R1.27 a litre for 95 petrol and R1.24 for diesel before any relief.
What the levy cut does
In his medium-term budget policy statement on 21 October, Finance Minister Enoch Godongwana announced a temporary cut to the General Fuel Levy. IOL reports that it takes R1.50 a litre off petrol and R3 off diesel from 4 November to 1 December, then R1 off petrol and R1.50 off diesel until 5 January.
Because the levy is part of the price, the cut is subtracted from whatever increase the slate produces. If petrol’s increase comes in below R1.50, motorists see a decrease. IOL’s estimate, if current trends hold, is a petrol cut of 50c a litre or more and a diesel cut of R1.50 or more.
What it does not do
The cut is temporary and shrinks in December. It does nothing about the oil price or the rand, which are what pushed 95 petrol up by about R8.80 a litre in a year, according to IOL. IOL also warns that if the Middle East conflict is not resolved by year-end, South Africans could face record prices again in January, right when the relief runs out.
The official November prices are published by the DMPR closer to 4 November. Until then, every figure you see, including the ones above, is a projection.
The quick version
- The pump price is the BFP (international product price plus shipping and storage) plus local transport, margins and taxes.
- It changes monthly, based on the daily over- or under-recovery.
- The levy cut is a temporary discount on the tax part, not a fix for the oil price.
- Official numbers come from the DMPR; projections are only that.