When and Why is Petrol Going Up in South Africa?
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What is causing the rise in petrol prices in South Africa?
The most likely cause of the petrol price hike in South Africa is rising global oil prices, which have been increasing since January 2017. This is because the oil supply has not been keeping pace with demand, and crude oil spillages have exacerbated this situation due to storms and human error. The cost of oil is, in turn, determined by several factors, including the demand for oil, the number of barrels being produced (a barrel is 42 gallons), the cost of transporting the oil, taxes involved, and the price of the local currency. The government of South Africa has also been known to affect the price of petrol with its various policies and taxes.
Government policies affecting prices
The government of South Africa has several policies in place that affect the cost of transporting oil. Firstly, the government levies a levy on all petroleum products. This levy is meant to finance the state’s operating expenses for the petroleum industry. The government also charges a VAT of 4% on all petroleum products, including petrol. The government also imposes a fuel levy on all government-owned vehicles and a road usage charge (RUC) on all vehicles.
The Rand and the exchange rate
Petrol prices in South Africa are also affected by the exchange rate between the local currency and the US dollar, the Rand. If the Rand falls against the dollar, it means that the purchasing power of the Rand will decrease, and so will the price of imports, including petrol. The opposite is also true.
Factors affecting the cost of transporting oil
Unlike a bar of gold or a barrel of oil, which is a one-time purchase, every barrel of oil is replaced regularly. Every time a barrel of oil is used, it must be replaced by another. The cost of replacing barrels of oil is known as the ‘carrying cost of oil.’ As the oil demand is increasing due to the growing global economy, the carrying cost of oil has been rising. This rising carrying cost is one of the factors pushing up the price of petrol in South Africa.
Conclusion
Petrol prices in South Africa are likely to remain high until the end of the year due to the rise in global oil prices, the government’s policies affecting the cost of transporting oil, and the falling value of the Rand against the US dollar. If you want to avoid the hike in petrol prices, you should try to carpool more often, use public transport, and avoid refueling your vehicle every other day. Petrol prices in South Africa are likely to remain high until the end of the year due to the rise in global oil prices, the government’s policies affecting the cost of transporting oil, and the falling value of the Rand against the US dollar. If you want to avoid the hike in petrol prices, you should try to carpool more often, use public transport, and avoid refueling your vehicle every other day.
