Trying to understand all the elements that make up the price of fuel can be quite intimidating. There are up to 13 different charges, depending on the type of fuel and place of residence. Currently, the price of 95 octane petrol inland is R20.29 per litre (December 2021). According to the Ministry of Mineral Resources and Energy1, this award is composed of these four major elements: in addition to the publication of the fuel price breakdown for 2021, the AA highlights the main points it raised before the Parliamentary Committee on the Mineral Resources and Energy Portfolio in mid-April. The association was invited to make representations to the committee on how to reduce rising fuel costs in South Africa. The FPB is calculated on the basis of import parity, which includes the costs of importing, transporting, insuring and storing liquid fuel purchased from foreign manufacturers. This price fluctuates according to the cost of international crude oil and is strongly influenced by the strength or weakness of the rand against the US dollar. The state will find it difficult to replace these sources of revenue with other mechanisms. It should seriously consider no longer imposing fuel taxes, while considering innovative ways to increase efficiency and reduce dependence on such levies. As of May 2020, a 93-litre of petrol inland cost R12.22, while one litre cost 95 octane petrol at coastal prices of R11.52. The same fuels cost R17.01 per litre and R16.51 per litre respectively in May 2021. This represents a 39% increase to 93 octanes inland compared to 2020 prices and a 43% increase for 95 octanes on the coast.
Last year, the AA predicted that with the growing recovery of economic activity around the world following COVID-19-related nationwide shutdowns, fuel prices would also rise in many countries. This happened with the fact that South Africans are now paying significantly higher prices at petrol pumps than last year. An increase in the price of fuel, whether through higher taxes or an increase in the price of basic fuel, has an impact on the economy. Fluctuations in fuel prices appear in two data sets from Stats SA. Figure 4 shows how the value of fuel sales in motor trade generally follows changes in fuel prices. In general, a higher price of gasoline leads to increased sales. « Our view is clear that there is an urgent need for a comprehensive and long-term analysis of fuel price components and that all fuel price calculations must be reviewed to determine whether they are still relevant and appropriate to South African conditions, » said Willem Groenewald, CEO of the Automobile Association (AA). Note the jump in the RAF tax in April 2015. Following an announcement by the Minister of Finance in February, the levy was increased by 50 cents (up 48%) on April 1, from R1.04 to R1,54.3 This higher-than-usual increase was partially mitigated in 2016, while no increase was announced. The other sharp increase came in April 2018, when the raf tax was increased by 30 cents from R1.63 to R1.93.4 Requests to change the way the price of gasoline in South Africa is determined and to limit the increases allocated to the GFL and RAF tax were recently submitted to the Parliamentary Committee on the Natural Resources and Energy Portfolio. According to current data, filling a 50-liter fuel tank inland (octane 93) on the coast costs R850.50 and R825.50 (95 octane) – R249.50 more than a year ago.
Costs are calculated using May`s fuel price data, which includes annual increases in the two main taxes paid on each litre of fuel, namely the General Fuel Tax (GFL) and the Road Traffic Accident Fund (RAF) tax. Two local factors that contribute to our current high fuel prices are the low value of the rand – which we attribute mainly to the government`s poor economic policies and the management of our fiscal affairs – and our government`s continued desire to raise taxes on motorists through fuel-related taxes over the years. The Automobile Association (AA) does not regulate or adjust fuel prices in South Africa and has no influence on how fuel prices are calculated. Fuel consumers in South Africa will pay about R5 per litre more for fuel in May 2021 than in May 2020. These increases were attributable to significant increases in fuel prices in the first months of the year, as fuel reached record highs in April. Although fuel prices declined slightly in May, fuel prices remain high and affect all sectors of the economy. Filling a 50-litre tank of petrol in South Africa will cost just over R250 in May 2021 than in May 2020. Rising fuel prices are putting upward pressure on consumer inflation. Figure 5 compares headline consumption inflation (blue line) with inflation that would have been if the direct influence of fuel had been eliminated (orange line).9 Periods when the orange line does not exactly follow the blue line show the significant impact of the change in fuel prices on headline inflation. The retail margin, which sets the break-even point for every litre of petrol sold by petrol stations to South African consumers, is currently around R2.21, or 12% of the price of petrol at the pump.
In addition, the current fuel tax revenues on which the state relies – particularly the General Fuel Tax (around R88 billion per year) and the RAF tax (around R45 billion) – will be Rand) – will come under considerable pressure over the next decade as the transition to electric vehicles becomes a reality. Note: The original version of this article, published on December 1, 2021, was based on fuel price adjustments announced by the Department of Mineral Resources and Energy (DMRE) on November 29. On December 1, the DMRE made changes to these adjustments. This article was revised on December 2, 2021 to reflect these changes. The two most important levies are the General Fuel Tax and the Road Accident Fund (RAF) tax. The general fuel tax is a tax on each litre of fuel. The RAF tax is a source of revenue for the RAF, which is responsible for compensating victims of road accidents. As a public service to consumers, the AA publishes two monthly fuel price forecasts – one in the middle of the month and one at the end of the month before the official announcement of the DMRE, usually two or three days before the first Wednesday of the new month.
The sharp decline in fuel sales in April 2020 is attributable to lower fuel prices as well as a sharp decline in economic activity related to COVID-19. .
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