Blog/News

Check out market updates

Why are Petrol and Diesel so Expensive?

petrol

Petrol and Diesel prices have always been a concern for most of the countries around the globe and there are many factors that contribute towards its growth and fluctuating prices. Petroleum is referred to as “Black Gold” by many due to its colour when it is extracted from the earth. The “gold” noun symbolizes its value due to its lower abundance and difficult extraction from the earth. Multimillion-dollars’ worth of infrastructure is required for its extraction and refinement which adds a significant amount on its prices, thus, it becomes evident to why fuel prices remain so high. People of South Africa have felt the frustration in recent months due to the rising petrol and diesel prices. This has made travelling costs far more expensive adding even more burden to the plight of the common man.

Let us explore some of the reasons that make prices of fuel so incredibly volatile and you can get your fuel at best price.

What affects the prices of fuel?

The prices for both petrol and diesel are a culmination of four key elements; Basic Fuel Price, Fuel wholesale and retail margins, The Road Accident Fund and the General Fuel Levy. Let us take a deeper look at these four factors in order to better understand what causes our petrol and diesel prices to be so high.

  • Basic Fuel Price:

The basic fuel price is simply the price of petrol and diesel a South African importer will have to pay to an international refiner. This price includes the cost of transportation for fuel.

  • Fuel wholesale and retail margins:

In simple words, wholesale fuel margins refer to the price that is charged by the refineries to various importers while keeping a margin of profit on their sales and the retail margin is the price that the various oil companies across South Africa at retail such as your local petrol station. The retail margin is regulated by the Department of Energy, South Africa.

  • Road Accident Fund:

As the name suggests, the Road Accident Fund provides insurance against all personal injuries to all drivers in case of an accident.

  • General Fuel Levy:

Administered by the National Treasury of South Africa, this tax is imposed for every litre of petrol that is sold by your local fuel suppliers.

 

Other factors that influence prices:

Given the exchange rates between the South Africa Rand (ZAR) and the United States Dollar (USD), many prominent economists of the countries have shown signs of concerns on the worsening of the prices of petrol and diesel. This becomes a key factor as prices of crude oil can be influenced by foreign policies and the exchange rate between the two countries.

Keep an eye on your tyre pressure and drive economically can help you to reduce your fuel costs aiding you to beat the rising prices.