by According to the Big Mac Index, the South African Rand is severely undervalued. Instead of the R13-R14 mark where it frequently lies, the true value is around R5.20 the US Dollar.
This had us thinking about what the true value of petrol in South Africa should be, since 50-litre barrels are traded in US Dollars.
Last year, the petrol rose by 100 cents in a six-month period, alarming many motorists who attempted to find alternate forms of transportation (or carpooling).
But, Why Is The Petrol Price Shifting At Such a Rapid Pace?
According to the Automobile Association (AA), the increase was as a result of an increase in the Fuel Levy (tax collected on every litre of fuel sold) – from R2.55 to R2.85 a litre.
The money collected through the Fuel Levy is administered by the National Treasury and is treated as a general tax, not, as many people assume, road-related expenses.
Many people look at the fuel price shown on a pump as the overall amount, owed to the petrol jockey, that they need to pay when filling their tank.
This, however, is not the case. The cost of this essential commodity is much more than that. It is made up of many different costs that, together, constitute what is commonly referred to as the petrol price.
Here’s What South African Motorists Need to Know
In South Africa, the price of fuel is adjusted monthly based on a number of factors. These mainly include international petroleum prices and the Rand / US Dollar exchange rate.
The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean area, Arab Gulf and Singapore, according to the AA.
These costs include insurance, storage, wharfage, and the cost to use harbour facilities when off-loading petroleum products into storage facilities.
In January 2017, these costs totalled R4.70 per litre for 93 unleaded petrol (inland).
Other costs associated with the petrol price include:
- Fuel levy
- Road Accident Fund Levy (RAF)
- Transport costs (from the harbour to other areas)
- Customs and excise duties
- Retail margins paid to fuel station owners
- Secondary storage costs
In January 2017, these additional costs totalled R6.76 (for inland users) per litre for 93 unleaded petrol. Of this, R2.55 was assigned to the Fuel Levy, and R1.54 was assigned to the RAF Levy, the AA explained.
How The Price Of Fuel Is Calculated
The Fuel Levy goes directly to the National Treasury, while the RAF Levy goes to the RAF, and is used to care for victims of car crashes.
This means that for every litre of petrol costing R13.09, 28% or R3.78 is allocated to different government levies.
Using this formula, filling a 50-litre tank with 93 unleaded petrol inland, will cost you R654.50. Of this, R127 goes directly to the Fuel Levy with a further R77 going to the RAF Levy, giving a combined total of R204.
