How the new fuel levy will hit South Africa’s petrol price

South Africa’s petrol price has fluctuated recently due mainly to an extremely liquid currency, which hit a worst ever level against the dollar, and an oil price which has traded at record lows.

The petrol price however, is comprised of a number of different fees, which all contribute to the total per litre cost of fuel at the pumps.

These fees include the basic fuel price (BFP), which is the single biggest piece of the total cost, as well as other duties and taxes such as the fuel levy, road accident fund contribution, and customs costs.

The fuel levy – which is set to increase again in April 2016 – is the second biggest single cost in the petrol price, followed by the dealer’s margin.

“This table, with data from Shell, shows how the current price of (inland) petrol is broken down – from largest to smallest cost in cents:”

Petrol price breakdown

“As seen in the graph above, while the basic fuel price covers the bulk of the pump price, most of the price is made up of levies and fees. Taking dealer margins and distribution costs out of the picture – between 34% and 42% of the petrol price is pure tax.”

In the budget tabled by Finance Minister Pravin Gordhan on Wednesday (24 February), the minister announced that the country’s fuel levy would be increased by 30 cents to R2.85 per litre of ULP/LRP fuel and R2.70 per litre of diesel.

The new levy will only take effect from 6 April 2016.

According to Neil Roets, CEO of Debt Rescue, the hike in the fuel levy spells disaster for SA consumers and businesses – specifically because most goods in this country are transported by road.

On a more positive note – at current currency and oil price levels, the petrol price for 93 and 95 unleaded and LRP fuel is set to come down by as much as 70 cents per litre in March, which may offset the fuel levy hike coming in April.

Diesel prices, however, are expected to increase by as much as 15 cents per litre.

South Africa doesn’t have the most expensive petrol in the world, but research from Bloomberg found that South Africans spend the biggest portion of their income on fuel compared to any other nation.

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