Mineral and Petroleum Resources Department reviewing fuel price mechanism
South Africa is reviewing its fuel price mechanism amid rising costs driven by global oil prices and a weaker rand, while authorities assure stable supply and extend temporary levy relief to ease pressure on consumers.
The Department of Mineral and Petroleum Resources says it is reviewing the local fuel price mechanism, with the process to be completed in March next year.
Last week, the government announced a temporary three-rand reduction in the general fuel levy to cushion consumers, as fuel prices have skyrocketed due to the Middle East conflict.
The department’s director of Fuel Pricing Mechanism, Robert Maake, says the price of fuel is the result of a multitude of global and domestic forces.
“Our pricing formula is based on two components. One of them is the import section, which accounts for all costs associated with importing petroleum products into South Africa.
“The second part is the local factor. What changes monthly is the international component, driven mainly by oil prices and the rand/dollar exchange rate. What is happening now is the very high oil price due to the war in the Middle East, which is driving the [escalating] fuel prices and the weaker rand,” he said.
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While international factors, including Brent Crude oil prices, demurrage rates, and freight costs, are set internationally, local factors are under consideration.
“The main one for us in the department is the review of the fuel price mechanism. What we are going to do now is review how industry margins are calculated in South Africa. The wholesale margins, retail margins, secondary storage, and secondary distribution,” Maake said.
“That process has started. We have already signed a service level agreement with a service provider, and we expect that work to be concluded by March 2027.
At the same time, Maake reiterated that fuel supply remains stable despite reports to the contrary.
“Insofar as supply is concerned, we are safe and secure. In the meetings that we are having with the oil companies…they have indicated the number of vessels that they have secured and confirmed that will be coming to the country, even up to the end of May. And, from time to time, when the vessels come, then they will place additional orders.
“We have daily meetings with the oil companies and people who are responsible for supply in the oil companies. That’s where they give us assurance in terms of the supply that they are bringing to the country.”
