News24

Petrol Price Q&A

2008-03-31 08:48

Cape Town - The petrol price keeps going up and up, and South Africans are starting to feel the pinch! The latest petrol price adjustment announced on Friday, March 28, will see petrol go up by another 66c a litre on Wednesday.

We asked Avhapfani Tshifularo, Controlled Products Pricing and Fuels Taxation Advisor at the South African Petroleum Industry Association (SAPIA) to explain some petrol price basics to us.

News24: What factors affect the price of petrol in SA?

Avhapfani Tshifularo: The petrol price in the international markets; demand and supply. If there are more buyers than sellers, demand is greater than supply and petrol price will tend to rise. If the opposite is true, petrol price will fall. The rand dollar exchange rate affects the price of petrol as well. The weakening of the rand against the dollar increased petrol price in SA and vice versa.

N24: How is the petrol price calculated? Can you explain the formula to us?

AT: It is calculated by the government by using a Basic Fuel Price (BFP) formula. BFP is an import parity pricing formula and it is intended to establish a realistic estimate of what it would cost to import substantial volumes of refined fuel. BFP is based on the spot prices quoted daily in international markets. The BFP of petrol is based on 50 percent of the price quoted in the Mediterranean area and 50 percent of the price in Singapore.

N24: Can you break down the petrol price for us? How much is tax? How much is for the product?

AT: At 27 March 2008, the break down of 95 unleaded petrol in Gauteng is:

N24: Why is the petrol price regulated in SA?

AT: Pursuant to the Petroleum Product Act, 1977 (Act 120 of 1977), the government fixes the petrol price by zones to recognise the differences in costs associated with the transportation of petrol between various geographic areas, the country is divided into 50-plus pricing zones.

N24: Why are the arguments for and against the deregulation of the petrol price? Which side do you agree with?

AT: SAPIA supports a liberalised market, reached by an orderly, fair and inclusive process, an economic climate that fosters competitive efficiency and continuation of world-class standards in our petroleum industry. Deregulation of the petrol price would not decrease petrol price but will encourage competition in the market.

N24: With the unpredictable price of oil, is there any way of knowing how high the petrol price can get?

AT: No, I suppose futurists attempt petrol price forecast but forecasts can be outdated very quickly. Politics, environmental, alternative energy, weather, etc are fundamentals that could easily swing petrol price forecast.

N24: What are petrol prices like in other parts of the world? Do we in SA really have it that badly?

AT: The South African petrol price is less than what you will normal pay in the European countries, India, Brazil, Mozambique, China and Zambia. The difference is mainly due to taxation and otherwise the base price is the same everywhere else in the other parts of the world.

N24: What can South Africans do to bring their petrol costs down?

AT: Use the right grade of petrol. Use lift club/public transport; ride the bus, take a train, ride a bicycle or walk instead of driving alone. Take advantage of telecommuting/telecommunications technology. Don't drive aggressively/drive at the speed limit. Reduce air conditioner use/close windows. Eliminate extra wind resistance and weight.

Maintain vehicle efficiency: regular maintenance as prescribed by the vehicle owner's manual will help your vehicle achieve its best fuel economy. Minimise vehicle idling. Avoid driving with underinflated tyres because tyre pressure that is too low not only increases consumption, but also remarkably reduces tyre life. Drive or purchase a fuel-efficient vehicle.

N24: Why does Sasol's locally produced petrol trade at the same price as imported petrol? Surely it should be cheaper?

AT: The petrol price is fixed by the government using BFP formula which is an import parity pricing formula that permits oil companies to sell petrol locally at the price that consumers would pay if they were to import the same products from another country. Basically petroleum is an international product hence the price for crude oil from African countries, e.g. Algeria, Angola, Libya, Nigeria, etc is determined by demand and supply in the international petroleum markets.

N24: Recent news reports say international oil demand will peak in 2012. What does this mean both for SA and the global economy?

AT: If indeed the international oil demand does peak in 2012, we will all have to adjust our standard of living quickly. Currently prices are high even though many futurists are pointing to a peak only in 2012. If the forecast is to be believed we should seriously start using petroleum products efficiently now! We should learn from the current electricity emergency because if we are short of petroleum life will be tougher than under current electricity emergency.

Thanks Avhapfani!

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News24

Comments
  • J.O - 2008-03-31 10:22

    Why the need for Import parity costing, when SASOL produces such a high percentage of Southern Africa's fuel demands? Surely this is a way of artificially increasing SASOLs' profit margins at the expense of the citizens of South Africa?

  • Tony Edwards - 2008-03-31 10:31

    What about the DIESEL price - to me this has escalated disproportionately to the PETROL price. DIESEL always used to be cheaper - and I thought cheaper to produce - why now is the next increase DOUBLE that of PETROL. Could someone PLEASE explain.......

  • CARLOS - 2008-03-31 10:34

    Sasol Explenation makes no sense....what was done for sasol in the past by government with taxpayers money?

  • Frederik Cocquyt - 2008-03-31 10:39

    Why do we have to import fuel when we can make our own in Sasol ? Why cant we just build more Sasol plantantions ? We have enough coal if we dont sell all of it to the Chinese this just doesnt make sense.

  • Nic the Greek - 2008-03-31 10:39

    Thanks for a very informative article! Atlast the general public can understand the things that affect the petrol price and can start becoming and informed public, not jumping to wild assumptions about companies that produce liquid fuels!

  • Bongani - 2008-03-31 11:05

    Why not remove the RAF cut per LT from petrol , That money gets stolen in anycase

  • Baber - 2008-03-31 11:05

    We cannot make ourselves (SA) independant from the rest of the world with our current democracy. With the apartheid government we were independant because of sanctions wich is one of the biggest reasons Sasol exists. We are now part of an international community and cannot just make our own prices, it will dump us into sanctions again. But Sasol is making big profit now, they should invest it into the community or buy yourself some shares to share in the profit.

  • Christian - 2008-03-31 11:06

    We need a safe,punctual and reliable public transport system like in Europe. In the big cities one does not need a motor car because of the well operated public transport system.Stop bikkering about elementary issues and get going. RSA is a great country,now get it to work.

  • Bossie - 2008-03-31 11:28

    Why does the Government hide the fact that Taxi operators receive a monthly allowance for fuel? Surely this money can be used to improve on our public transport system as it runs into millions every month?

  • Hanz Rauch - 2008-03-31 11:29

    It seems that the petrol price is influenced by the oil price which is influenced by global demand. What happens to Diesel? TV news says that local demand for diesel is what caused its price to soar. Surely local demand has a massive effect... can more diesel be imported in comparison to petrol... surely SA does not impact on the global diesel price that much? I would like a more specific explanation, specifically, the difference between petrol, diesel and paraffin hikes.

  • Clinton - 2008-03-31 11:32

    There needs to be openness on the calculation of the BFP. The sudden extreme rise in Diesel is just cause, especially with comments from the government regarding the high demand of diesel as reason for a higher increase( what a lot of .... ).

  • PETER - 2008-03-31 11:37

    JUST LIKE EVERYTHING ELSE THERE IS MORE MONEY TO BE MADE IN SA AS WE HAVE THE DEMAND THAN EUROPE WHICH IS A SATURATED MARKET THE SAME APPLIES TO THE PRICE OF MEDICINE.DIFFERENT PRICE STRUCTURES FOR DIFFERENT MARKETS.

  • Malebza - 2008-03-31 11:44

    Diesels is getting expensive because of forces of supply and demand. But I would like the gorvernment to deregulate the industry and promote competition because with competition consumers rend to benefit also.

  • Malebza - 2008-03-31 11:44

    Diesels is getting expensive because of forces of supply and demand. But I would like the gorvernment to deregulate the industry and promote competition because with competition consumers rend to benefit also.

  • Kenneth - 2008-03-31 11:44

    I would also like to understand why the diesel price is increasing at a steeper rate than the petrol price? This is going to have a severe inflationary effect as most transportation and agricultural vehicles use diesel.

  • Emile - 2008-03-31 11:56

    I agree with Tony Edwards - WHAT ABOUT THE DIESEL PRICE!! The hike of R1.30 in diesel price coming Wednesday is not even mentioned! Even if you don't drive a diesel, this is the figure that will have the biggest affect in price on anything delivered by road. Those trucks run on DIESEL, not 95 octane. Further I would really like to know - is there any country but SA where the ratio between diesel and petrol price is as is in SA?

  • Howzit my China - 2008-03-31 11:59

    Frederik Cocquyt, your comment about selling coal to China, The province of Ningxia in China has more coal than South Africa, SASOL is 51% share holder, of theese mines, and will soon start producing fuel in China.

  • concerned - 2008-03-31 12:14

    I think it is unfair to be compared to europeans about how much we pay for fuel. firstly those people don't need to have cars because they've got reliable transport 24/7 unlike here in SA. yes i agree with you that we can save by using public transport but it's government responsibility to make it reliable, safe, user-friendly and managed properly.

  • Andrew - 2008-03-31 12:28

    Lets face it; SA public transport is a sad affair. There is insufficient infrastructure and a very low coverage of transport routes. The worst aspect though is the high crime rate. This more than anything will deter people from making use of it, regardless of the costs. Life is more valuable than petrol! Looking at the chart of the petrol price I noticed a 21% allocated to levies and tax. This is rediculous. Why should Gov receive such a high percentage of an already high priced commodity?

  • Andrew - 2008-03-31 12:28

    Lets face it; SA public transport is a sad affair. There is insufficient infrastructure and a very low coverage of transport routes. The worst aspect though is the high crime rate. This more than anything will deter people from making use of it, regardless of the costs. Life is more valuable than petrol! Looking at the chart of the petrol price I noticed a 21% allocated to levies and tax. This is rediculous. Why should Gov receive such a high percentage of an already high priced commodity?

  • Andrew - 2008-03-31 12:28

    Lets face it; SA public transport is a sad affair. There is insufficient infrastructure and a very low coverage of transport routes. The worst aspect though is the high crime rate. This more than anything will deter people from making use of it, regardless of the costs. Life is more valuable than petrol! Looking at the chart of the petrol price I noticed a 21% allocated to levies and tax. This is rediculous. Why should Gov receive such a high percentage of an already high priced commodity?

  • LOGIC - 2008-03-31 12:33

    IT WILL BE IN THE ANC INTEREST TO UP THE DIESEL PRICE THEN THE FARMERS CANNOT MAKE ENDS MEET, HENCE THE LAND CAN THEN BE GIVEN TO ANC SUPPORTERS WITHOUT THE GOVERMENT HAVING TO PAY FOR THE LAND.

  • Garage owner - 2008-03-31 12:47

    Firstly the high demand of Diesel is attributed to ESKOM. Their Diesel operated generators , that are only supposed to run during emergencies or peak periods , now run 24/7. And they get less mileage than your Polo 1.4 Tdi !!!!!

  • Diesel - 2008-03-31 12:47

    why is diesel so expensive compared to a few years ago in comparrison to petrol. diesel is a byproduct from the manafacturing process of petrol. i will tell you the answer it is to subsidize the taxi industry.....

  • Garage owner - 2008-03-31 12:49

    Secondly deregulation would , like in Australia , lead to most garages being taken over by large corporations. Raymond Ackerman has long been pro deregulation. If it happens he will come in and buy garages. He would then be able to afford running these garages at a loss and therefore individualy owned garages would close down. Once Ackerman owns all the garages in a certain area the public would be at his mercy as he will then charge what he wants !!!

  • aa - 2008-03-31 12:53

    shouldn't diesel be cheaper? and most diesel cars are almost as ecomonical as the toyota prius (lupo, 118d, etc), so diesel cars should be encoouraged cos its better for the environment

  • Juiced - 2008-03-31 13:07

    There have been so many great inventions which are "green" and use no oil products. So why are we still having to worry about petrol. YES, i know - even with new technology there will be a cost for motorists to "upgrade" and some won't be able to afford to. It will be a seriously long process BUT putting this new tech into the market and stopping petrol vehicle production will 1. Save us money, 2. Cleaner air for or kids and grand kids. Oil companies buy the green projects and then??

  • Sicknick - 2008-03-31 13:11

    I think it is unfair to be compared to Europeans about how much we pay for fuel. firstly those people don't need to have cars because they've got reliable transport 24/7 unlike here in SA. SA's public transport only benefits one society. Why can't we also have a system like the Europeans. Our roads are not even maintained properly. How can we rely on the government to provide us with safe transport system? Does the petrol price affect the government or any of them? Honestly I don?t think so, most probably also free

  • turbo_superboss - 2008-03-31 13:17

    how does competition not lead to a drop in prices? diesel is going up more than petrol in an attempt to subsidise the increase in petrol price since taxis will go on strike etc. if sasol sold petrol for cheaper other countries would demand it and this would raise the price again, simple economics

  • Michael - 2008-03-31 13:25

    SASOL was set up since SA did not have the crude oil reserves; oil-from-coal was a means around this (realised as far back as 1927!). This lack of oil reserves is never going to change. The commissioning of more SASOL plants was done in the 70's when the oil price hit 70 USD per barrel. SASOL is POINTLESS if it is to adhere to international pricing regulations when it does not use OIL for production. Ludicrous.

  • Juiced - 2008-03-31 13:28

    I believe, IMO obviously, if the Government was really serious, which they aren't, the new cost projects for the Gautrain is R35bn. They could have setup a PROPER public transport system for the whole of Gauteng and run it for 20-30 years on that cost. But noooooo, more money to be made for their individual pockets doing it this way and what do we get? A modern rail system that almost goes nowhere for R35bn and will cost you around R75+/-, one way, to the airport.

  • Hidden Agenda - 2008-03-31 13:37

    In some Middle-Eastern countries fuel is far more cheaper as they are also oil producing nations.Why are they not guided by International prices.So why should SA be in any different? In countries like Iran they pay less than R2 a litre. Come on now, lets get a more detailed breakdown of the taxes on fuel..... Provide a safe and reliable public transport system and we all will be more than happy to use it.

  • marian van der walt - 2008-03-31 14:18

    one of these days i want beable to go to work as i will be working for petrol.

  • marian van der walt - 2008-03-31 14:18

    one of these days i want beable to go to work as i will be working for petrol.

  • Harish - 2008-03-31 14:19

    Surely deregulating the fuel price will result in competition which can be controlled by the consumer.

  • Lazy Govt - 2008-03-31 14:44

    How nice for the govt to see the oil and therefore petrol price going up. Why should they work on a fixed percentage regardless of the cost per litre? It would seem that they are the only ones benfitting here.

  • MKT - 2008-03-31 14:50

    Where do u get that one from Bossie ?? It's absolutely not true. The RECAP programme is an attempt by government to register all taxis to effect subsidising and taxation. At this juncture no such subsidy exists.

  • OCdiesel - 2008-03-31 14:51

    A little birdie mentioned to me that the price of Diesel is going up to try and force some of the goods being transported by trucks back onto the Railways,presumably cheaper, but not theft proof,and not on time.Eisshh

  • Peter N - 2008-03-31 14:53

    Many arguments are put forward for deregulation of the Industry. Perhaps if those in favour of dereg could answer one question: What is it that you understand would happen if the industry is deregulated?

  • Peter N - 2008-03-31 15:30

    What do you understand would happen if the Fuel Industry is deregulated? Cheaper prices? Afraid not so. Governments all over the world tax fuel as this is the easiest place to raise income. So irrespective of what you do, Government will not let go of the tax and levy portion. So what remains? The only money left is the Retailers and Oil Company margins. In dereg, consumers find prices eventually much higher than they would have been in a regulated market. Fuel industry is very complex.

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