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South African petrol prices under review

In an effort to soften the impact of skyrocketing fuel prices in South Africa, the Department of Mineral Resources and Energy (DMRE) has confirmed that it is reviewing aspects of how the country’s fuel prices are calculated, reported BusinessTech.

Mainly, the department is reviewing how industry margins are accounted for in the price of fuels, but little additional information was revealed.

“The Department has commenced the process to review how the industry margins are calculated and the details will be communicated to all stakeholders and the public once finished,” said the DMRE.

Industry margins include retail and wholesale margins as well as storage and distribution costs – but exclude the basic fuel price (BFP) and government levies and taxes.

Industry margins also account for the smallest portion of fuel prices in South Africa, with taxes and levies making up between 28-32% and the BFP just over 50% of each litre of petrol and diesel sold within its borders.

As such, fuel retailers and wholesalers have called on the government to seek price relief measures elsewhere as they are already operating on scant margins.

When paying R22.36 per litre of Petrol 95 at inland prices, approximately R11.46 goes to the BFP and another R7.00 goes to the government, leaving station owners with roughly R3.90 per litre to cover their costs.

Fuel price interventions

The announcement that the DMRE is reviewing the current fuel price calculations comes after a variety of initiatives were put in place throughout the year to curb the rapidly rising cost of living in the country.

In April, government implemented a “fuel tax holiday” that saw R1.50 removed from each litre of fuel from 6 April to 5 July, which was later reduced to 75c per litre from 6 July to 2 August.

When this came to an end, another intervention in the form of the removal of the demand-side levy on inland Petrol 95 saw 10 cents shaved off the price of this fuel type. On top of this, scrapping the 15% premium on freight reduced prices by another 10 cents per litre across the board.

Despite these measures, South African fuel prices hit an all-time high in July with petrol soaring past R26 per litre and diesel past R25 per litre.

Prices have come down slightly since then, though if current market conditions persist, there’s a good chance that come November, prices are going up again.


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