EDITORIAL | How much are petrol price hikes fuelled by state policy? SA needs to know

The petrol price on Wednesday hits a record high R19.50 a litre while diesel is increasing by R1.48 a litre to more than R17. To add to our woes, it is more than likely that motorists will be paying R20 a litre for petrol before the year ends. As the prices are adjusted every month, South Africans can be forgiven for feeling a bit like the fabled boiling frog placed in tepid water, which is slowly brought to the boil and cooked to death before it even realises it. The water has indeed become warmer and warmer for us over the past year: petrol has climbed by more than R5 per litre since January.

Besides the catastrophic fuel and diesel price hikes, the cost of illuminating paraffin is also soaring, while the maximum retail price for LP gas is shooting up by R2.90 a kilogram. The price hikes affect everyone, from public transport users and vehicle owners to those who use paraffin and gas (about 4% of households, according to Stats SA’s general household survey in 2019) for cooking. 

This is all the more reason for our government to sit up and take notice when organisations such as the Automobile Association call for a review on how fuel prices are calculated. There are factors outside the government’s control, such as demand imbalances, refinery costs and natural gas price hikes, but it should not be let off the hook so easily.

Economist Ndumiso Hadebe was recently quoted as saying the biggest drivers of our inflation data are fuel and food prices, and wages have not increased enough to make up for the extra costs. The government will need to do some “creative fiscal work”, he said, to ensure the increases do not hinder our Covid-19 recovery. According to the AA, at least R6 of the R19.50 South Africans will be paying for petrol per litre goes to taxes. This would include the general fuel levy and road accident fund levy.

The price hikes affect everyone, from public transport users and vehicle owners to those who use paraffin and gas for cooking.

The department of mineral resources and energy has recently included a “slate levy” into the price structures of petrol and diesel, a self-adjusting mechanism to deal with the daily differences in petrol prices. According to economic researcher Paul Joubert, the money from the levy is used to reimburse fuel companies for small imbalances that build up because of a difference between the monthly averages of the basic fuel price. Some months, the imbalance is such that money is theoretically owed to the consumer — and not the fuel company — and then that amount is placed in a pool for safekeeping to use as reimbursement when the situation is reversed. But when that pool is depleted, the slate levy comes into effect to restore the balance.

The AA has raised questions about this, calling on the government to clarify the additional slate levy that has ballooned to more than R1.65bn. “The fuel price has a direct bearing on an already weak economy as it continues to drive up inflation on essential consumer goods and affects every South African. As we have said many times in the past, all the elements that comprise the fuel price must be fully interrogated to determine if they are necessary. Given that the fuel prices are now at record highs, such a review is overdue,” it said in reaction to the latest price hike.

For most South Africans, the way in which the petrol price is determined is a complicated calculation only experts really understand. This makes it easy for our government to glaze over the details. But it owes the consumer at least an undertaking that it will review how the price is put together, with the man in the street’s interests top of mind as it goes through this exercise. The AA also pointed out it was curious to see the statement announcing the petrol price increase was datelined four days before the elections — but the release was delayed until 15 minutes before the polls closed. If this was deliberate, it is the action of a government realising the potential damage of the news but with no apparent will to seek ways to improve the situation.