Record high fuel prices: Can be lowered if government has the will
18 February 2022
The expected increase in fuel prices of about R1,20 per litre, depending on the specific category, can indeed be curbed – if the political will exists.
The fuel price in South Africa consists of three elements: The basic fuel price (approximately 40%), distribution costs (approximately 20%) and levies or taxes (the other 40%). It may seem that the government can only adjust the tax component, but in reality, all three elements are influenced by the government to a greater or lesser degree.
The basic fuel price is a hypothetical price that is calculated based on the assumption that all fuel is imported in its final form. It is determined almost exclusively by the Rand/Dollar exchange rate and the price of crude oil. The actual production cost of fuel in South Africa, therefore, has no effect on the price.
Distribution costs have been de-regulated with diesel, but in the case of petrol, there are fixed profit margins for each link in the chain.