South Africans breathed a sigh of relief on Wednesday, November 1, when petrol prices fell by almost R2, but the cost of fuel is still worryingly high.
There’s no need to summon Captain Obvious to figure out that there have been more fuel price increases than decreases in the past few years.
But just how severe have these price hikes been? And to what extent have they outweighed the decreases? It seems the only way is up..
Looking at historical price adjustments, the cost of petrol has increased 21 times in the past three years, and it has gone down just 12 times.
Between November 2020 and now, the price of a litre of 93 Unleaded petrol rose by R9.56, from R13.88 to R23.44. That’s an increase of 68.8% in just three years. For the record, 93 ULP is just 87 cents more expensive than it was this time last year and R4.12 dearer than two years ago.
The biggest increase of the past three years was the R1.71 hike implemented in September this year, while the largest decrease was R2.06 in January.
The R23+ petrol price of today is still somewhat below the July 2022 record high of R26.31, yet it has still outpaced inflation by a considerable margin. If we adjust the November 2023 petrol cost into today’s money using Consumer Price Index (CPI) data, petrol should cost no more than R16.46.
Granted, in late 2020 international oil markets were still recovering from the Covid-19 lockdown shocks from earlier that year, with Brent Crude Oil hovering around $42 versus the early November 2023 trade value of around $87.
Yet even if we adjust the November 2019 pre-pandemic price of 93 Unleaded (R15.21) to today’s money using that same CPI calculation, you should be paying no more than R18.60 for every litre.
The diesel scenario makes for even more depressing reading.
The wholesale price of 50ppm diesel (not to be confused with the retail price which can add around R2 depending on the outlet) has increased from R12.29 per litre in November 2020 to R24.40 today.
That works out to an additional R12.11, or 98.5% in just three years. Adjusted for inflation from 2019, it shouldn’t cost more than R18.03 in November 2023.
Diesel prices have risen 23 times in the past three years, and decreased on just 10 occasions.
The biggest diesel increase in the past three years was the R2.76 hike in September, which was immediately followed by a R1.93 rise in October. The biggest single decrease was R2.81 at the beginning of this year.
Why is fuel so expensive?
The post-pandemic economy of the past two years has seen oil prices trend upwards largely due to OPEC+ production cuts and the Russia-Ukraine conflict, and any further escalations in the Israel-Hamas war could also lead to more expensive oil going forward.
The currency hasn’t been as big a factor in the past three years, with the rand depreciating from R16.30 to the US dollar in early November 2020 to R18.43 at the time of writing.
However, a heavy tax structure for fuel in South Africa does aggravate the situation when oil prices are high, with the General Fuel Levy and Road Accident Fund levy collectively adding R6.13 to every litre of fuel in South Africa.
Click here to see how fuel prices are currently calculated in South Africa.
The Automobile Association (AA) has repeatedly called for a comprehensive analysis of the components of this fuel price calculation, and we really could not agree more.