Real reason South Africa’s petrol price is so high

Two factors contribute significantly to South Africa’s high petrol prices, and neither of them is the global crude oil price.

According to Wayne Duvenage, CEO at the Organisation Undoing Tax Abuse (Outa), a weakening rand combined with the government’s inclination to increase taxes on motorists is to blame for high petrol prices.

While the price of crude oil is an external factor out of the country’s control, increases in general petrol and Road Accident Fund (RAF) levies have steadily pushed up costs over the years.

The price of crude oil has increased since January 2021, from $49.20 (R755) to $83.40 (R1,279) per barrel. However, when looking at historical pricing and data, it is apparent that fuel levy increases implemented by the government make up a significant portion of the price per litre.

While the basic fuel price (BFP) has increased by almost 50% over the last ten years, combined levies on motorists have increased by 126% during the same period.

Furthermore, the increase in BFP itself can be attributed to the weakened rand.

“If you go back to November ten years ago, the price of oil was 31% higher than it is today, but fortunately for us, at that time the rand was a lot stronger,” Duvenage said.

In 2011, the rand was much stronger, trading at around R8.00 to the US dollar compared to R15.25 you would pay per dollar today.

Duvenage blamed the performance of the rand on South Africa’s economic policy and a weak government.

The graph below compares the BFP and various fuel levies from November 2021 to November 2011.

Comparison of petrol prices in November 2011 and November 2021

Outa explained the RAF levy has increased by 173%, the petrol levy has seen a 116% increase, and other levies have shot up 115%.

In 2011, combined levies totalled R4.48 per litre of 95 octane petrol. This figure is currently R10.10 per litre, making up more than half of what South Africans pay for petrol.

Duvenage called on the government to seriously consider holding back on these “relentless increases”.

Another critical factor Outa said the government should consider is its reliance on these levies.

The general fuel levy generates approximately R88 billion per year, and the RAF levy generates around R45 billion per year.

With many of the world’s car manufacturers transitioning to electrically powered vehicles, the state’s coffers could suffer as consumers buy less fuel.

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Real reason South Africa’s petrol price is so high