JOHANNESBURG - South African petrol prices are generally higher than its African neighbours with the exception of Zimbabwe, which has the dubious honour of having the most expensive petrol price in the world.
The average price of petrol prices at retail level around the world is $1.13 per litre at the exchange rate ruling on April 8 2019. According to GlobalPetrolPrices.com that is what the South African petrol price is at as well.
The average, however, hides substantial differences in petrol prices among countries with the range from 1 US per litre in Venezuela to US$3.40per litre in Zimbabwe.
As a general rule, richer countries have higher prices, while poorer countries, where governments subsidise the petrol price, and the countries that produce and export oil have significantly lower prices.
The differences in prices across countries are due to the various taxes and subsidies for gasoline. All countries have access to the same petroleum prices of international markets, but then decide to impose different taxes or subsidies. That is why the range of the retail price of petrol prices is so large.
Looking at South Africa's neighbours: Mozambique has the price closest to South Africa at $1.12 c/l , while eSwatini and Lesotho are priced at $0.92 and $0.93, respectively. Although all of Botswana’s petrol is trucked in from South Africa, its petrol price is $0.89, while Namibia has the lowest price at $0.87.
Iceland used to have the most expensive petrol in the world until Zimbabwe doubled the retail price earlier this year. That change sparked violent riots, but did not result in a change in policy, unlike Nigeria, where riots resulted in a change of policy after the government there decided to withdraw subsidies.
That is why Nigeria still has one of the world’s lowest retail petrol prices at $0.40 per litre, which is half of what it costs in the US. What is more astounding is that although Nigeria is an oil producer, the lack of refining capacity means it exports crude oil, but has to import refined petroleum products.
The large differential in the retail price of petrol between Zimbabwe and South Africa has resulted in a flourishing informal trade as individuals buy petrol in South Africa and then sell it to their friends in Zimbabwe for less than the regulated retail price and still make a profit. The unintended consequence of that is that congestion at Beit Bridge, Africa’s busiest border crossing, has increased tremendously as the customs and immigration officials are unable to cope with this additional increase in cross-border traffic.
Home Affairs Minister, Dr Siyabonga Cwele, said the busiest land border was Beit Bridge with 884992 during the Festive Season period of December 1 2018 to January 15 2019.
The other unintended consequence is that when road accidents now occur in Zimbabwe, frequently a contributory reason to deaths and injury is that the petrol being transported in buses and cars catches fire as the petrol containers were not designed to withstand an impact caused by a collision.
In South Africa, the retail petrol price is adjusted monthly on the first Wednesday of the month based on the average of the month ending on the Thursday in the week before with the announcement made on the Friday before the Wednesday of implementation.
The Central Energy Fund publishes a daily petrol price, which allows KwaZulu-Natal (KZN) readers to gauge whether they face a petrol price decline or increase at the next monthly adjustment. The daily movements are caused by changes in the exchange rate and the international price of petroleum products.
When the rand strengthens, as it is doing currently compared with the average of R14.3871 per US dollar in the March averaging period, then that reduces the petrol price. However, if the international petroleum price increases, as it has been doing for most of this year, then that increases the retail petrol price.
On April 8 the rise in the international petroleum prices outweighed the benefit of a stronger rand with the result that there was a 30.223 cents per litre under-recovery, in other words the retail price would have to increase at the next petrol price adjustment.
If one looks at the R15.49 per litre KZN retail price, then only R7.23 or less than half is due to the cost of the international petroleum price. Wholesalers get a 34.8 cents per litre (c/l) margin, retailers get a 198 c/l margin, there are secondary storage costs of 20.9 c/l and secondary distribution costs of 14.6 c/l. The remaining 557.5 c/l of the cost are taxes and levies that go to the government. If you buy in Gauteng you have to add a further 57.4 c/l for the transport cost from Durban.