Since 2008, petrol prices in South Africa have skyrocketed by an astonishing almost 200%, leaving consumers feeling the pinch at the pump.
Back in 2008, a litre of petrol cost just R7.20, but fast forward to today, and that price has surged to R21.55. This staggering increase has transformed the way South Africans fuel their vehicles and manage their budgets.
A historical perspective
To understand the current fuel crisis, we need to look back at the economic landscape of 2008.
During that time, the price of Brent crude oil peaked at $92 per barrel before settling at an average of $40.
Today, Brent crude is hovering around $73.20, a stark reminder of how global oil prices impact our local economy.
Imagine filling up a 60-litre tank back then for R432 compared to a jaw-dropping R1,293 today. The difference is not just numbers; it's a significant strain on household budgets.
Recent trends
While there has been a slight reprieve this month with a seven-cent decrease in petrol prices and diesel dropping by 17.5 cents (500ppm) and 23.5 cents (50ppm), this relief is fleeting.
It follows a series of price hikes over the past few months, leaving consumers anxious about what lies ahead. The reality is that the landscape has changed dramatically since the early 2000s. GDP growth, once a robust 4%, is now forecasted to linger between 0.5% and 1.3% by 2025, according to PwC South Africa.
What drives fuel prices?
So, what exactly contributes to the price of petrol? The cost is made up of several components:
- Retail margin: This accounts for about 15% of the petrol price and covers operational expenses for service stations and a return on investment.
- Storage and transport: Before petrol even reaches the pumps, storage and transport costs contribute between 3% to 7% of the price.
- Basic fuel price (BFP): This is a critical component, making up around 35% of the price. The BFP is influenced by the international cost of crude oil and the rand/dollar exchange rate, calculated daily and adjusted monthly.
- Wholesale margins: These account for nearly 3% of the fuel price.
- Government taxes and levies: A staggering 40% of the petrol price is attributed to government taxes and the Road Accident Fund (RAF) levy, which is estimated to generate R84 billion and constitutes about 5% of the government's tax revenue.
The future of fuel prices
Looking ahead, the outlook is grim.
The Minister of Finance, Enoch Godongwana, has indicated that fuel levies are set to increase, particularly following the recent outcry over a 2% VAT hike.
With the rand's volatility and devaluation, coupled with anticipated tax increases, consumers are bracing for further financial strain. The uncertainty surrounding a stable electricity supply and the political landscape adds to the anxiety, making it clear that the days of affordable fuel prices are likely behind us.
As South Africans navigate this challenging economic terrain, understanding the factors driving petrol prices is crucial. The impact of these rising costs extends beyond the pump, affecting everything from transportation to the cost of goods and services. Staying informed is key to managing your budget in these turbulent times