Cape town: For South African motorists, the price paid at the pump is far more than just the cost of the fuel itself, but the end result of a multitude of global and domestic forces ranging from the fluctuating price of crude oil and the strength of the Rand to the intricate costs of shipping, storage, and a series of government levies and taxes.
According to South African Government News Agency, the price is calculated using an import parity model designed to balance international competitiveness with local economic realities. The Department of Mineral and Petroleum Resources (DMPR) outlines that the underlying principles for the determination of the Basic Fuels Price (BFP) are to represent the realistic, market-related costs of importing a substantial portion of South Africa’s liquid fuels requirements. It is deemed that such supplies are sourced from overseas refining centres capable of meeting South Africa’s requirements in terms of product quality and sustained supply considerations. The petrol price in South Africa is directly linked to the price of petrol quoted in US Dollars at refined petroleum export-oriented refining centres in the Mediterranean area, the Arab Gulf, and Singapore. This linkage indicates that domestic prices are influenced by international crude oil prices, international supply and demand balances for petroleum products, and
the Rand/US Dollar exchange rate.
The BFP also ensures that local refineries compete with their international counterparts through an import parity principle, promoting cost efficiency and astute crude acquisition strategies. This approach aims to eliminate domestic inflationary pressures by ensuring survival in a volatile and competitive international environment.
The department lists several international influences affecting the BFP. These include Free-on Board (FOB) Values, which are petroleum product prices quoted daily by export-oriented refining centres. Freight costs for transporting refined petroleum products to South African ports are based on published rates, adjusted monthly. Demurrage rates are published by the World Scale Association Limited and are limited to three days. Insurance, ocean loss, cargo dues, coastal storage, and stock financing are additional international cost factors included in the BFP calculation.
The department also highlights domestic influences on fuel pricing, such as inland transport costs, wholesale and retail profit margins, and several levies including the General Fuel Levy, Road Accident Fund levy, Carbon Fuel Levy, Customs and Excise Levy, and Slate Levy. These domestic elements vary depending on the magisterial district zones where the fuel is sold.
The daily calculated BFP may result in either an over or under-recovery situation, impacting consumer prices. When the BFP is higher than the BFP in the fuel prices, an under recovery occurs, meaning consumers pay too little for the product. Conversely, an over recovery indicates consumers are paying too much. These variances are recorded and adjusted through the Slate Levy to maintain balance in the Slate account when it is in a negative balance.