Consumers deserve to know how the latest fuel price hike was calculated

By Neil Roets

AS WE head towards the National Budget Speech on February 23 , all eyes are on government to find a way to lower petrol prices, and perhaps even more importantly, to delineate how they will review how the latest petrol price was calculated.

With the price of petrol confirmed by The Department of Mineral Resources and Energy to rise steeply by another 53 cents per litre this week, taking 95 Octane Petrol beyond the R20 a litre mark again, consumer sentiment is that they are being fleeced at the pumps. 93 octane petrol remains below the R20 mark at R19.89. The fuel price adjustments will come into effect today.

The government has acknowledged that another petrol price hike is simply unsustainable, on the back of the massive fuel price hike of 40 percent in 2021 – and that the impact of this on consumers and household spending patterns and debt levels across the board will be devastating. Add to this the radical 20 percent electricity increase called for by Eskom, the latest interest rate hike, and the volatility of the Rand – all of which will inevitably lead to yet another rise in food prices – and it’s clear that consumers are being pushed to the brink of a sheer cliff.

The rising fuel price came under fire last quarter, prompting the Minister of Finance, Enoch Godongwana, to call on government to review how the cost of fuel is calculated.

This as the AA’s (Automobile Association) has also called for the price of fuel to be reviewed as a matter of urgency, with a call to consider separating the fuel levy from the basic fuel price. In December, the Minister responded saying, “A big part of the price increase is the levy. The way of countering price increases is an urgent matter, and that is on the table.”

But consumers deserve to know how the latest fuel price hike has been calculated. After all they are the one’s who will be bowing under the financial pressure that is the inevitable result.

According to energy sector expert Rod Crompton there are three broad components that influence the pump price – which is adjusted monthly. The first is the price of importing petrol, an import parity price called the Basic Fuel Price. The second component consists of regulated margins. These are the regulated costs and profits for wholesale, retail and pipeline transport services. The third component is made up of taxes and levies such as the Road Accident Fund levy, which pays for insurance for traffic accident victims. Added together, they result in the regulated petrol price seen at service stations.

The stark reality is that the petrol pump price increase will have a domino effect on the price of goods and services, and this means that many families will have to find a way to afford higher transport and fuel costs on the same salary.

Think of what this means for the workforce that relies upon various forms of public transport to go about their daily lives.

According to the Council for Scientific and Industrial Research, almost 60 percent of households in Johannesburg and Pretoria spent more than 10 percent of their income on public transport in 2019/20. This leaves precious little for the basic necessities like food, electricity and water – let alone the odd luxury.

There is a concern that more and more consumers will be forced to turn to credit to pay for everyday costs, an unavoidable if unsustainable option. According to a recent PayCurve survey almost 80 percent of South Africans take out expensive unsecured loans to cover their monthly financial obligations.

Using debt to service living costs is a recipe for disaster – it’s like digging a hole that you can never climb out of.

I advise those who are in a debt trap to consider all their options, including consulting with a registered debt counsellor.

This has been a very successful solution for thousands of consumers who are plagued by over-indebtedness.

Neil Roets is the chief executive of Debt Rescue

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