Fuel Levy and RAF (Road Accident Fund) Levy make up big part of price at the pump

As of April 6 2016, the cost of a litre of fuel shot up by between 81 cents a litre and 98 cents a litre depending on the fuel you use.

Petrol 95 increased by 88c/l, 93 by between 81c/l and 86c/l, and the two diesel fuels by either 96c/l or 98c/l. The cost of a litre of 93 unleaded petrol inland is now R12.32 (up from R11.46) and R11.94 for litre of petrol at the coast (up from R11.13).

The 30c/l increase to the Fuel Levy, announced by Finance Minister Pravin Gordhan during his budget speech in February, has been added to all of the price adjustments.

This additional 30c/l has moved the Fuel Levy – a tax collected on every litre of fuel sold – from R2.55 to R2.85 a litre. The money collected through the Fuel Levy is administered by the National Treasury, and is treated as a general tax, not, as many people assume, only for road-related expenses.

For many, the fuel price is merely a number on a pump that they need to pay when filling their tank. But, according to the AA,  the cost of this essential commodity is much more than that; it is made up of many different costs that, together, constitute what is commonly referred to as the petrol price.

In South Africa this price is adjusted monthly based on a number of factors, mainly international petroleum prices, and the Rand/US Dollar exchange rate.

The Basic Fuel Price (BFP) is calculated based on costs associated with shipping petroleum products to South Africa from the Mediterranean area, Arab Gulf, and Singapore. These costs include insurance, storage, and wharfage, the cost to use harbour facilities when off-loading petroleum products into storage facilities.

In April 2016 these costs total R5.26 per litre for 93 unleaded petrol (inland), and R5.21 for a litre of 93 unleaded at the coast.

Other costs associated with the petrol price include transport costs (from the harbour to other areas), customs and excise duties, the retail margins paid to fuel station owners, and secondary storage costs. Importantly, these other costs also include the Fuel Levy, and the Road Accident Fund (RAF) Levy.

Currently these other costs total R7.06 for inland users, and R6.73 for coastal users, per litre of 93 unleaded petrol. Of this, a revised figure of R2.85 is allocated to the Fuel Levy, and R1.54 to RAF Levy.

The Fuel Levy goes directly to the National Treasury, while the RAF Levy goes to the RAF, and is used to care for victims of car crashes.

This means that for every inland litre of petrol costing R12.32, R4.39 (35 percent) is allocated to different government levies. For every litre of coastal petrol costing R11.94, close to 37% is allocated to the levies.

Inland

Using this formula, filling a 50 l tank with 93 unleaded petrol inland, will cost R616.00. Of this, R142.50 goes directly to the Fuel Levy with a further R77 going to the RAF Levy, giving a combined total of R219.50.

Coastal

Using this formula, filling a 50 l tank with 93 unleaded petrol at the coast, will cost R597.00. Of this, R142.50 goes directly to the Fuel Levy with a further R77 going to the RAF Levy, giving a combined total of R219.50.

The Automobile Association (AA) releases a prediction for the change in the fuel price in the middle of every month, and again at the end of the month ahead of the official announcement by government.