For South African motorists, the price paid at the pump is far more than just the cost of the fuel itself. It is the end result of many global and domestic factors, including the fluctuating price of crude oil, the strength of the rand, shipping and storage costs, and several government levies and taxes.
According to the Department of Mineral and Petroleum Resources (DMPR), the fuel price is calculated using an import parity model designed to balance international competitiveness with local economic realities.
The department says the Basic Fuels Price (BFP) represents the realistic market-related cost of importing fuel into South Africa. Petrol prices are therefore directly linked to the price quoted in US dollars at refining centres in the Mediterranean, the Arab Gulf and Singapore.
Domestic fuel prices are therefore influenced by:
• International crude oil prices
• Global supply and demand for petroleum products
• The Rand/US Dollar exchange rate
The import parity principle is used to ensure that local refineries compete with international counterparts and to promote cost efficiency in a competitive global market.
International influences include:
• Free-on-Board (FOB) values – Petroleum product prices quoted daily by export-oriented refining centres in the Mediterranean, Arab Gulf and Singapore.
• Freight – The cost of transporting refined petroleum products from these centres to South African ports. Rates are based on freight data published annually and adjusted monthly using the Average Freight Rate Assessment (AFRA).
• Demurrage – Charges for delays while petroleum products are loaded and offloaded at ports. The calculation allows for a maximum delay of three days.
• Insurance – About 0.15% of the FOB value and freight cost, covering insurance and related costs such as letters of credit, surveyors and laboratory fees.
• Ocean loss – A loss allowance of 0.3% to account for normal losses during transportation.
• Cargo dues (wharfage) – Charges for using harbour facilities to offload fuel into onshore storage tanks. These tariffs are set by the National Ports Authority.
• Coastal storage – The cost of storing fuel at coastal terminals. The calculation provides for 25 days of storage and is adjusted annually according to the Producer Price Index (PPI).
• Stock financing – The cost of financing stored fuel, based on the landed cost of petroleum products, 25 days of stockholding and the prime interest rate minus 2%.
The BFP, quoted in US dollars per barrel or ton, is converted to US cents per litre and then to South African cents per litre using the applicable exchange rate.
Domestic influences also affect the final fuel price and include:
• Inland transport costs – The cost of transporting fuel from coastal refineries to inland depots by road, rail or pipeline.
• Wholesale margin – A regulated margin granted to fuel wholesalers. It aims to provide an industry-average return of about 15% on depreciated asset values.
• Retail profit margin – A margin set by government to cover service station operating costs, including rent, labour, overheads and business compensation.
• General Fuel Levy – A tax collected on every litre of fuel to fund government spending.
• Road Accident Fund levy – Adjusted annually to fund compensation for road accident victims.
• Carbon Fuel Levy – Introduced to reduce carbon emissions.
• Customs and Excise Levy – A tax imposed by the South African Revenue Service.
Another component is the Slate Levy, which is a temporary adjustment based on daily calculations.
If the daily BFP is higher than the fuel price at the pump, an under-recovery occurs, meaning consumers are paying too little. If the daily BFP is lower, an over-recovery occurs, meaning consumers are paying too much.
These daily calculations are averaged over the monthly review period. The difference is multiplied by the volume of fuel sold and recorded in a cumulative recovery account.
If this account moves into a negative balance, a Slate Levy is added to fuel prices to recover the shortfall.
According to the Department of Mineral and Petroleum Resources (DMPR), the fuel price is calculated using an import parity model designed to balance international competitiveness with local economic realities.
The department says the Basic Fuels Price (BFP) represents the realistic market-related cost of importing fuel into South Africa. Petrol prices are therefore directly linked to the price quoted in US dollars at refining centres in the Mediterranean, the Arab Gulf and Singapore.
Domestic fuel prices are therefore influenced by:
• International crude oil prices
• Global supply and demand for petroleum products
• The Rand/US Dollar exchange rate
The import parity principle is used to ensure that local refineries compete with international counterparts and to promote cost efficiency in a competitive global market.
International influences include:
• Free-on-Board (FOB) values – Petroleum product prices quoted daily by export-oriented refining centres in the Mediterranean, Arab Gulf and Singapore.
• Freight – The cost of transporting refined petroleum products from these centres to South African ports. Rates are based on freight data published annually and adjusted monthly using the Average Freight Rate Assessment (AFRA).
• Demurrage – Charges for delays while petroleum products are loaded and offloaded at ports. The calculation allows for a maximum delay of three days.
• Insurance – About 0.15% of the FOB value and freight cost, covering insurance and related costs such as letters of credit, surveyors and laboratory fees.
• Ocean loss – A loss allowance of 0.3% to account for normal losses during transportation.
• Cargo dues (wharfage) – Charges for using harbour facilities to offload fuel into onshore storage tanks. These tariffs are set by the National Ports Authority.
• Coastal storage – The cost of storing fuel at coastal terminals. The calculation provides for 25 days of storage and is adjusted annually according to the Producer Price Index (PPI).
• Stock financing – The cost of financing stored fuel, based on the landed cost of petroleum products, 25 days of stockholding and the prime interest rate minus 2%.
The BFP, quoted in US dollars per barrel or ton, is converted to US cents per litre and then to South African cents per litre using the applicable exchange rate.
Domestic influences also affect the final fuel price and include:
• Inland transport costs – The cost of transporting fuel from coastal refineries to inland depots by road, rail or pipeline.
• Wholesale margin – A regulated margin granted to fuel wholesalers. It aims to provide an industry-average return of about 15% on depreciated asset values.
• Retail profit margin – A margin set by government to cover service station operating costs, including rent, labour, overheads and business compensation.
• General Fuel Levy – A tax collected on every litre of fuel to fund government spending.
• Road Accident Fund levy – Adjusted annually to fund compensation for road accident victims.
• Carbon Fuel Levy – Introduced to reduce carbon emissions.
• Customs and Excise Levy – A tax imposed by the South African Revenue Service.
Another component is the Slate Levy, which is a temporary adjustment based on daily calculations.
If the daily BFP is higher than the fuel price at the pump, an under-recovery occurs, meaning consumers are paying too little. If the daily BFP is lower, an over-recovery occurs, meaning consumers are paying too much.
These daily calculations are averaged over the monthly review period. The difference is multiplied by the volume of fuel sold and recorded in a cumulative recovery account.
If this account moves into a negative balance, a Slate Levy is added to fuel prices to recover the shortfall.
