South Africa’s 79% petrol price pain

South Africa’s petrol and diesel prices have increased substantially over the past decade despite a sharp decline in the price of oil over the period.

The main factors driving these hikes were the significant devaluation of the rand and large fuel tax increases.

Consumer goods prices are regularly adjusted more or less in line with inflation changes. However, South Africa’s fuel prices have increased substantially in recent years.

MyBroadband analysed the retail prices of petrol and wholesale prices of diesel in South Africa over the past ten years to see how much more motorists were paying to fill up.

We used the Automobile Association of South Africa’s online fuel pricing tool for this comparison.

It was interesting to note that all fuel prices declined slightly between May 2014 and May 2016. Thereafter, they gradually increased year-on-year up to May 2019.

In May 2020, global fuel prices plummeted due to an oil price crash driven by the Covid-19 pandemic.

Many governments enforced lockdowns that limited people’s movements and caused a widespread slowdown in some business activities.

With more people working from home, demand for car fuel declined as there were fewer commuters and goods transport drivers on the road.

That relief would not last long as fuel prices recovered well in the following three years.  In South Africa, they skyrocketed.

As of May 2024, the price of a litre of unleaded 95 petrol was 79% higher than in May 2014.

The graph below shows South Africa’s inland retail petrol and wholesale diesel prices changed from May 2014 to May 2024.

Why South Africa’s petrol price increased so much

The two biggest factors that influence the price of motor fuel in South Africa are international oil prices and the rand’s exchange rate to the dollar.

Oil is the primary ingredient in petrol and diesel, and oil barrels are often sold with US dollar prices.

South Africa’s monthly fuel price adjustments are based primarily on how these two elements change during a review period that covers most of the preceding month.

In April 2014, a barrel of Brent Crude oil was near all-time record highs of around $110 to $120. In April 2024, the price has ranged between $85 and $90.

Had the rand remained at roughly the same exchange rate to the dollar as ten years ago, South Africans could have been paying less for fuel.

However, the rand’s exchange rate to the dollar in April 2024 averaged roughly R18.88 compared with R10.55 in April 2014.

A $115 barrel of oil in April 2014 would have cost about R1,213, compared with a $85 barrel of oil in April 2024 costing R1,605. That works out to around 32% more.

Although numerous complex international factors can influence the exchange rate, South Africa’s poor economic performance—exacerbated by an energy crisis—has been a heavy burden on the rand.

The remainder of the fuel price increase is primarily attributed to tax hikes.

Between the government’s 2014/2015  and 2023/2024 financial years, the general fuel, road accident fund, and other levies increased by 72%, adding a further R3.43 to the price of every litre of fuel.

The other levies consist of transport, secondary storage, and distribution costs.

The last element in the fuel price calculation is wholesale and retail margins, the markup wholesalers and retailers add to make a profit off fuel sales, which have remained low due to strong market competition.

The chart below shows the rand exchange rate against the US dollar over the last decade.