How you lower the fuel price

2018-07-25 06:02

THE ANC and President Cyril Ramaphosa appear determined to lower the fuel price — in the midst of raising it — with Business Tech reporting that the government is “actively seeking ways” to find a solution to the problem.

A Scottish colleague recently told me that he finds the situation in South Africa bewildering.

Having lived in 50 countries around the world, he told me South Africa is the only place he’s ever been where there’s no competition in the fuel industry. This is due to one simple reason: the government fixes the price of fuel. Ramaphosa’s assurances that the fuel price is “beyond the government’s control” and that South Africa is a “price taker” is simply untrue.

In April, the Automobile Association shared some interesting facts about the fuel price.

In April, a litre of 95 unleaded fuel arriving at a petrol station in Gauteng cost R8,93. This is the basic fuel price — determined by factors largely outside of South Africa’s control, with the possible exception of custom dues.

Of course, we weren’t paying R8,93 for fuel then, we were paying R14,22. This is because of the general fuel levy (R3,37 per litre) and the Road Accident Fund levy (R1,93 per litre) that the government imposes on each litre of fuel.

These surcharges are within the government’s control. For a 50-litre tank of fuel totalling R711,50, we were thus paying only R446,50 for the actual fuel. The remaining R265 that we paid in April for a tank of petrol disappeared into the pit of government inefficiency and corruption.

Evidently, there’s much the government can do. It can lower, ideally abolish, both the general fuel levy and the Road Accident Fund levy.

The government has not taken its road-fixing mandate seriously for some time, and it is clear that the money destined for that purpose goes elsewhere.

The Road Accident Fund is broke, and has been for several years. SA consumers should not be expected to foot the bill for this inefficient waste of money. But more than that, the government should remove itself from the determination of fuel prices.

We pay exactly the same for petrol whether we are buying it from Shell, Engen, BP or Caltex — there is no competition between these fuel franchises.

One cannot try to win more customers from the others by charging less for fuel, because the government determines both the minimum and maximum prices.

Whereas in the United States you can drive a few kilometres down the road to the next fuel station to pay less, in SA you are at the mercy of what the government has ordained to be the price.

At different times of the same day in the U.S., the price could be cheaper or more expensive, because the market is allowed to respond to changing circumstances. Different states also have different consumption taxes on fuel, so fuel prices are not the same between states.

South Africans should not ask the government to stop raising the price, or to lower the price, of fuel.

Instead, we should insist that the government leave fuel alone. Its arbitrary control of the fuel industry should be abolished in favour of free competition and consumer-centric enterprise. — FMF.

• Martin van Staden is a legal researcher at the Free Market Foundation and is pursuing a master of laws degree from the University of Pretoria.


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