Johannesburg - Wednesday, December 1, will see South African petrol prices surging beyond the R20 per litre mark, for the first time in history.
There are many reasons why fuel prices are rising at such an unprecedented rate, but the prime culprits are strong international oil prices, a weak rand, and high taxes.
The rand has been weaker than its current level of $16.15 to the US dollar, and Brent Crude oil has been more expensive than the $73.44 per barrel that was listed at the time of writing. But never before have we had such a weak rand and strong oil price at the same time. Annual fuel tax increases are no doubt aggravating the situation, and we’ll get to that a little later.
The end result, however, is that fuel prices have risen at a rapid rate in recent years and this becomes all the more apparent when we look at how petrol prices have changed over the last decade, as the tables below illustrate:
A sobering reality is that the price of 93 Unleaded petrol in Gauteng has risen by a whopping 91.8% in the last 10 years, 60% in the past five years, and 41% in the last year alone – although prices were a little higher than last year’s level, prior to the original Covid-19 oil price crash. If we adjust the 2011 price to general inflation over the last decade then today’s price should be R16.94, according to inflationcalc.co.za.
We did not include diesel in the tables, as it is unregulated and thus only wholesale prices are provided. However, for what it’s worth, the cost of a litre of 50ppm diesel has increased from R10.33 to R17.37 (at the coast) in the 10 years to December 2021, and from R10.53 to R17.97 in the inland regions. Respectively, those amount to 10-year increases of 68.1% and 70.6% for your Hilux or Ranger’s huge 80-litre tank.
How taxes contribute to high fuel prices
As mentioned, annually rising fuel levies and taxes are adding salt to the current fuel price wounds, and a recent illustration released by the The Organisation Undoing Tax Abuse (OUTA) drives this point home – keeping in mind that it’s a November 2011 to 2021 comparison, that doesn’t include the December increase.
Essentially the price of petrol (as it docks at the harbour) has increased by 49%, from R6.29 to R9.37, however, all the other levies, taxes, retail margins, and so on, have risen by 126%. In terms of actual taxes, the levy that goes to the embattled Road Accident Fund has increased by 173%, while the fuel levy has gone up by 116%, according to OUTA. The end result is that taxes currently account for R6.11 of every litre that goes into a fuel tank in South Africa.
The Automobile Association (AA) said that the latest increases, once again, highlight the urgent need for an investigation and recalculation of the current fuel pricing model.
“This price disaster is entirely home grown,” the AA said.
“Internationally, oil prices have pulled back from their recent highs and Brent Crude is currently trading around $75 a barrel. The majority of this month's under-recovery is because of the weakening of the rand against the US dollar,” the association said.
“These increases are severe and will undoubtedly have major negative implications on already financially constrained consumers,” added the AA.
Freight companies have also urged the government to intervene, as the sector buckles under the strain of yet another fuel price hike – read more on that here.