The AA is not exaggerating when it calls the latest fuel price hikes “catastrophic”.
Petrol, diesel and illuminating paraffin prices keep breaking new records, and after the latest hike at the beginning of November, a litre of 95 unleaded petrol now costs R19.54 in Gauteng and looks likely to cross the R20 mark by the end of the year.
At that price, filling up a car with a 50/l tank would cost R1,000, which is R277 more than it was a year ago when petrol was R14.46/l. Multiply that by an average four fill-ups per month, and it’s grim reading for motorists and consumers at large. Diesel, a big cost in the manufacturing, agricultural and freight and transport sectors, is 30% more expensive than at the beginning of the year and illuminating paraffin is 35% higher.
Fuel hikes drive up inflation on consumer goods at a time when unemployment is the highest it’s been and many people have had their salaries cut.
The increases are primarily driven by high oil prices and a weakened rand, but the burden on consumers could be reduced by reducing fuel taxes, and the AA has called for a review on how fuel prices are calculated.
The two main taxes paid on every litre of fuel are the General Fuel Levy (GFL) and Road Accident Fund (RAF) levy, together comprising over 31% of the price. It leads to petrol and diesel being cheaper in neighbouring countries who buy fuel from SA but don’t add such onerous taxes.
The fuel price is also made up of transport costs (from the harbour to inland areas, which accounts for the difference in price between coastal and inland prices), custom and excise duties, retail margins paid to fuel station owners and secondary storage costs.
The combined levies now make up R10.10 of each litre of 95 octane petrol, 126% higher than a decade ago.
The levies in 2021 are expected to deliver about R126bn to the government with about R83bn coming from the GFL, and R43bn coming from the RAF levy.
Motorists have long been cash cows for the government in the form of fuel taxes and vehicle licence fees, which would be easier to swallow if road users received something tangible in return. As the poor state of many non-tolled roads attests, fuel taxes aren’t used to directly benefit motorists in the form of better road maintenance. The funds instead go to the Treasury and can be used for any purpose the government determines, and are subject to corruption, bailouts, and a bloated civil service.
The cynical might also question why the announcement of the latest fuel price hikes, scheduled for a few days before the municipal elections, was delayed to a few minutes before the polls closed on election day. The AA definitely doesn’t think it was all a coincidence.
As for vehicle licence fees, they go to the Road Traffic Management Corporation which hasn’t delivered on its mandate to meaningfully improve road safety.
Given this situation, motorists might well feel they’re not getting bang for their buck.
In calling for a review on how fuel prices are calculated, the AA says all elements making up the fuel price must be fully interrogated to determine if they are necessary, but admits that convincing the government to cut levies will be a hard sell.
Whatever happens with fuel taxes, the basic fuel price is determined by the oil price and exchange rates, which are external factors over which we have no control. High oil demand and the volatile rand mean SA consumers are probably in for a rough ride in the next three to six months, the AA believes.
High fuel prices might have helped push more motorists into electric vehicles (EVs) at a time when clean energy is high on the agenda, if it weren’t for our power supply woes and the excessive price of EVs. The solutions lie at the government’s feet. Eskom will take longer to fix, but a quick win would be to reduce the high import duties on EVs.
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