Petrol price to drop only 1 cent, diesel by more than R1 - Daily Maverick

This may seem like scant relief but another hefty price hike would have been in the offing were it not for the fuel levy reductions announced in last month’s mini-budget. That in turn has partly been diluted by an increase in the slate levy of over 48 cents per litre, bringing it to 135.84 cents per litre.

South African motorists and consumers more broadly have some relief at hand with fuel pump prices set to fall marginally from midnight on Wednesday, 4 October, thanks to a revenue boost to the Treasury.

The 95 and 93 grades of petrol will fall just 1 cent per litre while wholesale diesel prices will decline by between 109.82 cents and 119.82 cents per litre, the Department of Mineral and Petroleum Resources said on Tuesday.

This may seem like scant relief but another hefty price hike would have been in the offing were it not for the fuel levy reductions announced in last month’s mini-budget. That in turn has partly been diluted by an increase in the slate levy of over 48 cents per litre, bringing it to 135.84 cents per litre.

Slate levies kick in when the price of importing crude exceeds what consumers pay at the pump.

The fuel levy will be reduced by R3 per litre for diesel and R1.50 per litre for petrol from 4 November to 1 December. This relief will continue until 5 January 2027, with the diesel levy cut by R1.50 per litre and the petrol levy by R1 per litre.

A quick refresher on fuel leviesThe general levy is a tax motorists pay to support the infrastructure that cars use. The RAF levy funds the victims of road accidents – mostly pedestrians, cyclists or public transport commuters. The slate levy is the difference between the cost of acquiring and distributing fuel around the country across the month, versus what costs were recovered through the sale of fuel.

Funding for the relief comes from R10-billion that had been transferred to the Central Energy Fund. It has been returned to the National Revenue Fund and placed in the Contingency Reserve – funds ring-fenced for emergencies.

Ultimately, this amounts to “a fiscal cost of R10-billion in foregone revenue”, Finance Minister Enoch Godongwana said in his mini budget speech. It is effectively a temporary tax cut.

But that revenue can be sacrificed on the altar of consumer aid because of revenue overruns. The projection for gross tax revenue for this financial year has been revised upwards by R17.1-billion compared with the February estimate.

Even though marginal, the drop in fuel prices – as opposed to a rise – will help to put the brakes on inflation and down the road could contain the rise in domestic interest rates.

“The average Brent Crude oil price increased from $101 to $108 during the period under review. The increase is due to uncertainty caused by Middle East conflict, including the recent attacks on Saudi Arabia infrastructure as well as high freight and insurance costs caused by ship-to-ship transfers,” the Department of Mineral and Petroleum Resources said in a statement.

Meanwhile, the average rand/dollar exchange rate during the month eased to 16.55 from 16.21 during October. Those are two of the key metrics used to determine South Africa’s fuel pump prices in the following month.

Along with the various levies, this all gets crunched in the sausage grinder that ultimately determines the pump price.

Elevated global oil prices are largely a consequence of US President Donald Trump’s ill-conceived war of choice with Iran.

Combined now with South Africa’s exclusion from Agoa, this US administration is taking a growing toll on our domestic economy. It is small consolation that it is also taking a toll on the global economy.

But at least South African families won’t have to fork out so much this December when they hit the road for the holidays. DM