How are SA fuel prices determined?
South Africa’s fuel prices are shaped by global oil markets, the Rand exchange rate, transport costs and levies. This is how the price at the pump is determined.
Fuel prices in South Africa are influenced by a combination of international market forces and domestic costs. Understanding how these prices are determined provides insight into the mechanisms that shape what drivers pay at the pump each day.
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What is the Basic Fuels Price?
At the heart of South Africa’s fuel pricing system is the Basic Fuels Price (BFP). According to the Department of Mineral Resources and Energy, the BFP is designed to represent the realistic, market-related cost of importing the majority of the country’s liquid fuel requirements.
The principle assumes that South Africa sources these fuels from international refining centres that meet quality standards and ensure a reliable supply.
The BFP links domestic petrol prices directly to international petroleum prices quoted in US dollars at export-oriented refining centres in the Mediterranean region, the Arab Gulf and Singapore.
This approach means that South Africa’s fuel costs are influenced by three primary international factors: global crude oil prices, the balance of supply and demand for petroleum products and fluctuations in the Rand to US Dollar exchange rate.
How do international factors affect domestic fuel prices?
Several factors are considered when calculating the international influence on the domestic fuel price. Free-on-Board (FOB) values represent the daily quoted price of petroleum products at overseas refining centres. Freight costs cover the transport of refined products from these centres to South African ports. Freight rates are adjusted monthly based on the Average Freight Rate Assessment, which factors in shipping risks and global supply and demand for vessels carrying refined petroleum.
Demurrage costs (a charge for detaining a ship, freight car, or truck) are also included, covering loading of fuel at overseas ports and discharge at South African ports. These rates are published by the World Scale Association Limited and are calculated with a maximum demurrage period of three days. Insurance costs, set at 0.15% of the FOB and freight values, cover letters of credit, surveyors’ fees, agent fees and laboratory costs.
An ocean loss allowance of 0.3% accounts for uninsurable losses during transportation. Cargo dues, or wharfage, cover the use of South African harbour facilities, while coastal storage costs recover expenses associated with storing and handling fuel at coastal terminals. The stock financing component is based on the landed cost of the product, 25 days of stockholding, and the prevailing prime interest rate minus two percent.
Once these factors are calculated, the BFP, initially quoted in USD per barrel or tonne, is converted into US cents per litre using international conversion rates, and then into South African cents per litre using the current Rand/US Dollar exchange rate.
What domestic factors influence the final pump price?
After determining the BFP, several domestic costs, levies and margins are added to calculate the final petrol price across South Africa’s fuel pricing zones. Inland transport costs cover the movement of fuel from coastal refineries to inland depots by road, rail, pipeline or a combination thereof.
Wholesale margins are calculated based on a set guideline to allow marketers a benchmark return of 15% on depreciated book values of assets. Retail profit margins are fixed by the Department of Mineral Resources and Energy and reflect the actual cost for service stations to sell fuel, including rental, labour, interest, overheads and entrepreneurial compensation.
Other factors include levies and taxes. The Equalisation Fund, currently set to zero, is intended to equalise fuel prices. Fuel tax is determined by the Minister of Finance, while customs and excise levies are collected according to agreements within the Southern African Customs Union. A Road Accidents Fund levy applies to petrol and diesel to compensate third-party victims of vehicle accidents.
What is the Slate account and how does it work?
The BFP is calculated daily and may be higher or lower than the fuel price reflected at service stations. A BFP higher than the station price results in an under recovery, while a lower BFP leads to an over recovery.
These daily differences are averaged over the fuel price review period and multiplied by local fuel volumes, with cumulative amounts recorded in the Slate account. When the Slate shows a negative balance, a levy is applied to recover the shortfall.
How do all these components affect the fuel price?
The combination of international factors, such as crude oil prices and transport costs, and domestic factors, including margins, levies, and taxes, determines the final petrol price at South African pumps. By using the BFP as the foundation, the Department of Mineral Resources and Energy ensures a fair, transparent and competitive system that reflects global market realities while accounting for local costs and regulations.
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