South Africa’s R366 petrol price pain

South African motorists are paying substantially more for petrol than they did a decade ago — primarily due to a significantly weakened rand and increased taxes.

From 6 November 2024, the price of a litre of unleaded 95 petrol will be R21.30, up 61.85% from R13.16 in November 2014.

Ten years ago, it would have cost R592.20 to fill up a typical 45-litre tank with unleaded 95. After the latest fuel price adjustments, it will cost R958.50 — R366.30 more.

In general, the international oil price is the biggest driver of petrol and diesel prices in South Africa.

Oil is the base ingredient in petroleum, used to make both petrol and diesel at overseas and local refineries.

In October 2024, which included most of the review period for November 2024’s official fuel price calculations, the average price of a barrel of Brent Crude was $72.81.

Over the same period 10 years ago, it was 17.92% higher at $85.86.

However, the rand has also weakened substantially against the US dollar during that period.

The average dollar-to-rand exchange rate climbed from R11.08 a decade ago to R17.57 — a R6.49 or 58.57% difference.

Where a barrel of Brent Crude oil cost about R1,130 in October 2014, its price in South African currency has climbed to R1,279.

However, the rand is not the only factor weighing heavily on fuel prices.

The government has also raised the combined general fuel levy (GFL) and Road Accident Fund (RAF) levy from R3.79 to R6.14 — a 62% hike over 10 years.

The R2.35 difference accounts for around 28.87% of the total increase.

A third factor which has increased fuel prices is the government increasing the allowable retail margin on petrol by R1.43, a 100% jump from a decade ago.

That increase is arguably the most necessary to ensure that fuel stations remain commercially viable in an environment where profit margins are very slim.

The table below summarises how the main variables impacting fuel prices changed between November 2014 and November 2024.

Fuel price review

The total increase in the unleaded 95 petrol price works out to a compound annual growth rate of 4.93%.

That is not too far off the annual inflation rate over the past decade.

Some would argue that this means local motorists are not paying much more for fuel relative to their monthly budgets, assuming their wages also increased in line with inflation.

That would ignore the fact that the fuel price itself is an inflation driver, as it increases the prices of transporting food and essential goods and commuting.

That being said, according to GlobalPetrolPrices.com, South Africa’s average fuel price of R20.66 in October 2024 was 7.19% cheaper than the global average.

The country’s fuel prices have also reduced substantially in the past year, dropping about 12% from October 2023.

The reason why motorists might still be feeling the pinch is that the average fuel price after the Covid-19 pandemic has been substantially higher than in the preceding years, as shown in the graph below.

Fuel price review in the works

After years of calls from civil society to bring down fuel prices, President Cyril Ramaphosa announced a plan to review South Africa’s fuel pricing methodologies during his Opening of Parliament Address in July 2024.

The intention of the review is to reduce prices by changing certain cost elements in the fuel price make-up.

Mineral resources minister Gwede Mantashe recently said that petrol and diesel should cost R14 per litre, roughly the same as it did a decade ago.

He blamed the fuel price levies for distorting the actual cost of the fuel.

ENS Africa Tax Practice executive Charles De Wet has warned that if the government reduced these levies, it would have to collect the taxes it sources from fuel through other avenues, which would just end up biting consumers in another area.

Economist Dawie Roodt has argued that the government could reduce fuel prices if it coincided with more effective management and cost-cutting.