The mysterious fuel price

2016-02-03 06:00

WITH the price of brent crude oil hovering below the $32 mark, consumers would expect a drastic drop in the price of petrol.

Last month, there was great anticipation because the Department of Energy Affairs said there would be a decrease in the price of all grades of fuel. However, this hype was short-lived as diesel decreased by around 60 cents and petrol decreased by three cents a litre. What a colossal joke.

It’s difficult to understand the formulation of the price of fuel. Even with the depreciation of the rand to R19 to the dollar, fuel prices should be in the region of R5 a litre.

Could this be a way of bleeding consumers to the bone or probably a way to fund the failing e-toll system?

The Department of Energy Affairs needs to go on a massive public-awareness and information campaign to educate consumers on how the cost of fuel is calculated.

If all the economic variables are added to the equation then the fuel price seems blatantly skewed.

A transparent mechanism needs to be used in the calculation of the fuel price which would make it easier for all consumers to understand.

Robert Nicolai puts the current price of fuel into context. In 2004, the current price of oil was $37,66 a barrel and now it costs in the region of $30,44, which means the price should have come down.

However, in 2004, the rand-dollar exchange was R6,73 to the dollar (R6,73:$).

It is now fluctuating in the region of R16,39:$, which equates to R498,91 for a barrel of oil, compared to R253,45 when oil was more expensive.

In 2004, the cost of petrol was R3,69 as compared with the price now at R11,94, which means that while oil prices went up only by 49,2%, our fuel costs have increased by a staggering and mysterious 223%.

Another aspect to contemplate is that with the current price of brent crude oil at around $30, motorists are paying R11,94 for a single litre of petrol.

What will be the scenario if prices increase to $60? Will the price of petrol increase to R22 a litre?

What will be the repercussions if the price of brent crude reaches the price of a year ago, which was in the region of $120 to $130 a barrel.

However, at these prices, motorists were paying between R12 to R13,50 a litre. Hence it can be postulated that we as consumers are being drastically overcharged.

The current price of petrol should be in the region of R5 a litre, which is inclusive of all government taxes and takes into account the fluctuation of the rand against the dollar.



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