Is The Diesel Price Regulated In South Africa?

The retail price of diesel is not controlled. The retail profit margin is expected to be comparable to the regulated profit margin on gasoline.

Is diesel price regulated?

The retail price of diesel is not controlled. The prices of regulated petroleum products are primarily determined by two factors: The product’s dollar price on foreign markets multiplied by the US$/R exchange rate are the external factors.

What determines the price of diesel in South Africa?

Mr Gwede Mantashe, Minister of Mineral Resources and Energy, has announced that fuel prices will be adjusted on January 5, 2022, based on current local and international circumstances.

Fuel prices in South Africa are modified regularly, based on worldwide and local considerations. The fact that South Africa imports both crude oil and finished products at worldwide prices, including importation costs such as transportation costs, is one of the international factors.

When comparing the current period to the previous one, the Rand declined on average versus the US Dollar (from 15.40 to 15.92 Rand per USD). This resulted in an increase of around 29.00 cents per litre in contributions to the Basic Fuel Prices of gasoline, diesel, and illuminating paraffin.

During the time period under consideration, the average Brent Crude oil price fell from 83.00 USD to 76.00 USD per barrel. The primary contributors are (a) the

declaration by the United States to release up to 50 million barrels from its strategic petroleum reserve to bolster supply, and (b) the advent of the omicron variant, which sparked concerns about new mobility limitations, which would, as usual, cut oil demand.

The downward trend in crude oil prices was followed by a downward trend in international refined petroleum product prices. This resulted in lower payments to the Basic Fuel Price for petrol (100.47 and 102.86) cents per litre, diesel (100.20 and 102.00) cents per litre, and illuminating paraffin (100.41 cents per litre).

The 95 octane (unleaded) grade is the price-marker grade, and the BFP-differential between 95 and 93 octanes is modified on the first Wednesday of each quarter, according to the Working Rules for determining the Basic Fuels Prices (BFP). Because the BFP Octane disparity altered in the preceding quarter, retail prices for 95 and 93 octane gasoline will differ in each fuel-pricing zone starting on January 5, 2022.

The pricing structures of petrol and diesel will be increased by 2.20 cents per liter (from 41.46 cents per liter to 43.86 cents per liter) in accordance with the Self-Adjusting Slate Mechanism guidelines, which will take effect on January 5, 2022. At the end of November 2021, the cumulative Slate balances of petrol and diesel totaled a minus R4.842 billion. In accordance with the Self-Adjusting Slate Mechanism Rules, the Slate Levy is utilized to compensate the industry for cumulative under recovery.

With effect from January 5, 2022, the Minister approved an annual adjustment to the pricing elements of the maximum retail price of LPGas. The average Consumer Price Index (CPI) for 2020 of 3.3 percent was used to modify operational expenses and working capital, while the average Producer Price Index (PPI) for 2020 was used to adjust depreciation, principal transportation costs, and gross margin.

The price index (PPI) for 2020 is 2,6%. The MRP has increased by 37.0 c/kg along the coast and 43.0 c/kg inland (Gauteng).

Fuel prices for January 2022 will be modified as follows, based on current local and worldwide factors:

Who regulates fuel prices in South Africa?

The retail price of gasoline is set by the government and changes every month on the first Wednesday. The Central Energy Fund (CEF), on behalf of the Department of Energy, calculates the new price (DOE).

Who controls the price of fuel?

  • Gasoline prices, like nearly other commodities, are governed by the law of supply and demand.
  • As new oil wells are discovered and economic conditions effect consumer demand, supply and demand are constantly shifting.
  • Longer term, the supply of high-quality oil is fixed and diminishing, while global demand is rising due to population increase and economic expansion.

What makes up the price of diesel?

Because both gasoline and diesel are made from crude oil, the price of crude oil is the most important factor influencing gasoline and diesel costs. Fuel prices, on the other hand, take into account refining expenses, taxes, and distribution and marketing expenditures. Market demand also has an impact on retail prices.

What is the price of 1 litre diesel?

On September 24, 2017, the international market price of diesel was $68.92 a barrel (one barrel equals 159 litres).

The day’s average exchange rate is Rs.64.09 per dollar, bringing the cost of a litre of fuel to Rs.27.78. The OMCs pay refineries Rs. 28.16 per litre, according to the daily price formula.

OMCs offer it to dealers for Rs. 30.22 per litre after deducting their profit margin, marketing costs, freight, and other fees.

The fuel station dealers then add Rs. 17.33 per litre in excise duty, Rs. 2.50 per litre in commission, Rs. 2.50 per litre in VAT, and Rs. 8.67 per litre in pollution cess, and sell it to customers for Rs. 58.72.

Why are fuel prices regulated?

The government has an impact on retail fuel costs by establishing maximum pricing for petroleum products, which are updated on a regular basis. The goal of this type of price management is to safeguard consumers from unexpected price increases or excessive market prices.

Why is fuel so expensive in SA?

While the worldwide oil price and the value of the rand dictate the monthly petrol price in South Africa, motorists are also indirectly paying for local policy issues, according to Wayne Duvenage, chief executive of civil society group Outa.

“The weak value of the rand – which we attribute largely to poor government economic policy and fiscal management – and our government’s incessant desire to raise taxes on motorists through fuel-related levies over the years are two local factors that contribute to our current high fuel prices,” he said.

According to Duvenage, the present Brent crude price (about $83.50 per barrel) is mostly a result of external factors outside the country’s control. He highlighted that this cost has risen by over 70% since January’s price of $49.20, and that it has had a substantial impact on local gasoline prices.

He noted, however, that the international price of oil was substantially greater a decade ago than it is now.

“Brent crude was $109 per barrel a decade ago in November 2011, which was 31% higher than it is now. Fortunately for us, the rand was trading at R8 to the US dollar at the time, compared to the current exchange rate of R14.72, which is 84 percent higher.

“The current petrol price would be around R16.00, roughly R3.50 lower per litre, if the rand/dollar exchange rate was the same today. “This is the cost of having a weaker currency,” he explained.

The basic fuel price component of the petrol price has risen from R6.29 per litre for 95 octane petrol – 58 percent of the price of R10.77 per litre a decade ago – to R9.37 per litre as a result of these two factors, according to Duvenage.

“Despite the fact that our currency cost is 84 percent greater than it was a decade ago, this component has climbed by 49% over the last decade. Despite the greater BFP component, our primary worry should be the 126 percent increase in different levies and taxes imposed over the last decade.”

“The General Fuel Levy, the Road Accident Fund (RAF) levy, and additional levies added up to R4.48 per litre of 95 octane gasoline in November 2011. Today, that amount is R10.10, up R5.62 (126 percent) from a decade earlier. This is shown in the table below, which shows how these levies have affected gasoline prices over time.”

Levies, such as the Road Accident Fund and the Petrol Levy, now account for 52 percent of the fuel price, compared to 42 percent a decade ago.

According to Duvenage, the government has effectively stretched the envelope on gasoline fee hikes too far and should seriously consider reducing its tax revenue demands.

Furthermore, if the transition to electric vehicles becomes a reality, the state’s present fuel tax revenues – particularly the General Fuel Levy and the RAF levy – will face severe pressure in the coming decade, he warned.

“The state will have a difficult time replacing these revenue streams through other means, therefore it should carefully consider freezing fuel charges in the future while looking for inventive ways to boost efficiency and minimize dependency on these levies.”