SA's fuel price mechanism under review

South Africa’s department of mineral and petroleum resources is reviewing the local fuel price mechanism, a process expected to be completed by March next year.

This was confirmed by the department’s director of fuel pricing mechanism, Robert Maake, who spoke to SAnews.gov.za in Pretoria on Tuesday.

Maake explained that the price of fuel is the result of a multitude of global and domestic forces, ranging from the fluctuating price of crude oil and the strength of the Rand to the intricate costs of shipping, storage, and a series of government levies and taxes.

“Our pricing formula is based on two components. One is the import element, where all costs associated with importing petroleum products into South Africa are accounted for," Maake said.

“The second part is the local factor. While the international component, driven mainly by the oil price and the Rand/Dollar exchange rate, changes on a monthly basis, the local factors are also under consideration. Currently, escalating fuel prices are being driven by a very high oil price due to the conflict in the Middle East and a weaker Rand,” he added.

While international factors, including the price of Brent Crude oil, demurrage rates, and freight costs, are set globally, the department is focusing its efforts on domestic elements.

“The main priority for the department is the review of the fuel price mechanism. We will be reviewing how industry margins are calculated in South Africa, specifically wholesale margins, retail margins, secondary storage, and secondary distribution.

“That process has started. We have already signed a service level agreement with a service provider and expect that work to be concluded by March 2027,” Maake revealed.

In the immediate term, the government has announced a temporary reduction of the general fuel levy by R3 to cushion consumers.

“In the short term, this means consumers are paying R3 less for petrol and diesel at service stations, which is beneficial for households and motorists. It is difficult at this stage to say how the government will intervene in the long term or what the next steps will be,” Maake said.

This article has been shortened. SAGovNews