While a substantial portion of the petrol price, which recently hit a record high of over R20 a litre, is due to the fluctuating rand and global crude oil prices, the total make-up of the local petrol price is complex. A substantial portion comes from various government levies implemented to make our roads safer.
Astron Energy GM: Retail Tebogo Mekoa explains that the price of petrol is set monthly by the Department of Mineral Resources and Energy, and is generally the same across the country, apart from at the coast, where it is cheaper because there is no need for long fuel lines to get it inland.
As the rand has recently been weakening due mainly to the strength of the dollar, the cost of purchasing oil – in dollars – has become more expensive. And oil itself has increased in price, now hovering above $70 a barrel of brent crude compared to half that in 2020.
The oil price is likely to go higher still, as there are talks among the Organization of the Petroleum Exporting Countries (OPEC) cartel of continuing to adjust the supply of oil to ensure that supply is sustainable, says Mekoa. “This is basic economics, when supply is limited and demand increases, the price goes up.”
Those who want an idea of what the fuel price will be before it is announced can go onto the Central Energy Fund’s website, where the over/under recovery prices are shown. “Because prices are adjusted monthly, government needs to either drop the price if it was charging too much because oil dropped, or hike it if it was charging too little,” explains Mekoa.
Fuel companies such as Astron Energy do not set the fuel price.
In addition to these factors which make up the basic price of petrol, there are levies, which are adjusted each February in the National Budget Speech. The basic fuel price, based on currency and oil movements makes up almost half of the cost.
A third, says Mekoa, comes from levies and taxes, such as for the Road Accident Fund, which pays out when people are injured in an accident. The other levy is the general fuel levy, which goes towards maintenance of our road network.
The remainder of the cost lies in retail and wholesale margins, set by government at 14% for fuel retailers such as Astron Energy, as well as storage and distribution costs (6%), such as piping fuel to Johannesburg from Durban.
How to save
While the fuel price is out of your - and our - control, there are ways you can save money on fuel, particularly now with the festive season around the corner when many South Africans will embark on long journeys home or go on holiday.
Remember to:
- Avoid keeping your car idling, as this just runs out fuel without getting you anywhere
- Make sure your tyres are inflated according to manufacturing specifications as incorrect tyre pressure can lead to increased fuel consumption, and also pose a safety risk
- Stick to the recommended speed limited and even better, drive at around 10% slower than the limit so as to save more fuel
- Use air conditioning sparingly, as this burns more fuel
- Don’t drive with your windows open as this creates unnecessary drag
- Use apps such as Google Maps or Waze to determine the best route with the least traffic congestion
- Use cruise control if your vehicle has such a function
- Keep your car maintained and serviced on a regular basis. Sludge in the engine instead of clean oil as well as clogged filters cause the motor to work harder
“Above all else, please drive safely on the roads and be considerate to all road users,” concludes Mekoa.
BUSINESS REPORT