1. ## Petrol Price Increase

As we all know petrol is going up by 28c on Wednesday and I really would like to find out why. On the news it was said that the rand weakened againsts the us dollar which is through however the difference is 15c from when they last increased the petrol price last month. So my basic calculation is to take a barel of brend crude and calculate the amount of petrol and diesel in it, barel is almost 160 litters of which 43% is petrol and 23% is diesel that makes it 66% which means 106 litters from a barel is petrol and diesel. Based on that i take 15c x 106 liters = R15.90 so theoretically that is the increase but when the rand was stronger and the petrol price was increased the price per barel was 125 dollars where now it is under 120, so if you following my calculations you will note that petrol should actually go down and not up.

Price of petrol in 2008 was R10 dollar was at the same price 7,70 and brend crude oil was 145 rand a liter, how come now petrol is more than R2 more expensive?

I searched on the internet but there is no clear explanation of how the petrol price is calculated and what money goes where. I found an article from 2005 and at that stage the real petrol price was less then half of the selling price, 8.1% was going to the retailers, 8% was going to the wholesalers and the rest was government taxes. I would like to know what the exact values are now and how exactly is the price of petrol calculated? I'd love to hear from somebody that is in the industry that can explain accurately.

2. Please be careful Nickolai, trying to apply any logic to the increases in petrol price can result in severe consequences. The guy below had a masters in economics and made this mistake, unfortunately you can see the result for yourself.

3. ## Thanks given for this post:

Miro Bagrov (09-May-12)

4. I think it's fair to say that we're now paying for the nice new shiny blue lights on the JHB highways, through the added petrol price

5. Originally Posted by Nickolai Naydenov
so if you following my calculations you will note that petrol should actually go down and not up.
With you being a financial guy... There's a "smoothing fund calculation" element in this. You'd probably have to track the price trend using a 60 or 90 day average price in Rands to identify the turning points in the retail price.

6. Lol... Dave if I knew how to calculate it I wouldn't ask, besides I've never studied that, that's why I would like to find out exact calculations and methods.

7. In simple terms then (given that stats is commonly conceded as a bitch of a subject),

The price of crude doesn't fluctuate on a monthly basis, while the retail price of fuel is adjusted on a monthly basis. To deal with this there's an equalisation fund to manage under and over recoveries. As a result there's an element of lag between the cost of crude and the retail price of fuel due to the effects of the equalisation fund.

8. FuelPrice_calculation_SA_07_1170868230705.pdf

We know that every year they increase taxes. This year they added 20c/l.

On the price calculation the use something they call the Basic Fuel Price (BFP):

This one is from SASOL:

The petrol retail price is regulated by government, and changed every month on the first
Wednesday of the month. The calculation of the new price is done by Central Energy Fund
(CEF) on behalf of the Department of Minerals and Energy (DME).
The petrol pump price is composed of a number of price elements and these can be divided into
international- and domestic elements. The international element, or Basic Fuel price (BFP), is
based on what it would cost a South African importer to buy petrol from an international refinery
and to transport the product onto South African shores.
International petroleum market spot pricesThe largest component of the basic fuels price is the price that one would be paying on
international markets when physically importing product to South Africa. The FOB (Free on ship’s
board) product prices from different locations in the world, based on international product
availability and product quality, are used. The petrol FOB price is calculated as 50% of the
Mediterranean spot price for Premium unleaded petrol and 50% of the Singapore spot price for
95 Octane unleaded petrol. For the FOB price of Diesel, the BFP formula use spot prices
Med/Italy
(Petrol 50%
Distillates 50%)
Arab Gulf
( Distillates 50%)
Singapore
(Petrol 50%)
Freight,
Demurrage,
Insurance &
Cargo Dues, Losses
Storage &
Finance Cost
calculated as 50% of the Mediterranean price for Gas oil and 50% of the Arab Gulf price for Gas
oil, plus the quoted spot price market premiums applicable.
Freight cost to bring product to South African ports
The freight component of the BFP reflects the cost of voyages from Augusta (in the
Mediterranean), Singapore and Mina-al-Ahmadi (in the Arab Gulf), in 50:50 combinations as
appropriate to the international markets used in the FOB calculations of the products concerned.
Tariffs as published by the World Scale Association for transporting refined products via mediumrange
vessels to a weighted average for South African coastal ports, plus demurrage for an
average 35 000 ton vessel for 3 days, adjusted with the Average Freight Rate Assessment
(AFRA) of the London Tanker Brokers Panel, plus a market premium for transporting fuels to
South Africa.
Insurance costs
Calculated as 0.15% of the product FOB and freight costs, to cover insurance cost, as well as
other costs such as letters of credit, surveyors’ and agents’ fees, and laboratory costs.
Ocean loss allowance
In international petroleum products trading, shipping and insurance, a loss of 0.3% for products
has been accepted as a normal leakage/clingage and evaporation loss. Simply put, this means
that the “normal” loss is not insurable and has to be accepted by the buyer. The buyer therefore
has a financial loss of 0.3% of FOB, Insurance and Freight costs.
Cargo Dues
The BFP calculates Cargo Due charges in terms of the ruling National Ports Authority of South
Africa “contract” tariffs for “petroleum products”.
Coastal Storage
This element allows recovering of the costs realistically incurred in a substantial import scenario,
related to costs of the handling facilities at coastal terminals providing storage.
Stock Financing Cost
The BFP includes a charge for the financing of 25 day’s coastal stock of an importer, at an
interest rate of 2 percentage points below the ruling prime rate of the Standard Bank of South
Africa.
The BFP as determined above is converted to SA cents per litre by applying the applicable SA
Rand/US Dollar exchange rate (four banks selling rates at eleven o’ clock averaged over the
pricing period before the price change), and a constant litre per gallon factor of 3.8038 for petrol.
2. Domestic Elements
To arrive at the final pump price in the different pricing zones (magisterial district zones) certain
domestic transport costs, government imposts, taxes and levies and retail and wholesale margins
needs to be added to the international price.
a. Transport costs (Zone differential)
Keeping in mind the import principle used, this element recovers the cost of transporting
petroleum products from the nearest coastal harbour (Durban, Port Elizabeth, East
London, Mossel Bay or Cape Town) to the inland depot serving the area or zone.
Transport to the different pricing zones are determined by using the most economical
mode of transport i.e. pipelines (C zones), road (B zones) or rail (A zones). This is the
only element which values differ per pricing zone, and is the reason why the petrol price
is not the same for the whole country.
b. Delivery costs (Service differential)
This element compensates marketers for actual depot related costs (storage and
handling) and distribution costs from the depot to the end user at service stations. The
value is calculated on actual historical costs of the previous year, averaged over the
country and industry.
c. Wholesale (Marketing) margin
Money paid to the oil company through whose branded pump the product is sold, to
compensate for marketing activities. This margin is controlled by the government,
allowing for changes based on the oil companies’ return on their marketing assets.
The formula used to determine the wholesale margin is based on the results of a
cost/financial investigation by a chartered accountant firm into the profitability of the
wholesale marketers. The level of the margin is calculated on an industry basis and is
aimed at granting marketers a return of 15% on depreciated book values of assets, with
allowance for additional depreciation, but before tax and payment of interest.
d. Retail margin
The retail margin is fixed by DME and is determined on the basis of actual costs incurred
by the service station operator in distributing petrol. Account is taken of all proportionate
driveway related costs such as rental, interest, labour, overheads and profit. The way in
which the margin is determined creates an incentive to dealers to strive towards greater
efficiency, to beat the average and to realise a net profit proportionate to their efficiency.
e. Equalisation Fund levy
The statutory fund levy is a fixed monetary levy, and the fund is regulated by ministerial
directives issued by the Minister of Mineral and Energy Affairs in concurrence with the
Minister of Finance, as laid down by the Central Energy Fund Act, No 38 of 1977 as
amended In terms of Ministerial Directives the Fund is principally utilised to smooth out
fluctuations in the price of liquid fuels through slate payments; to afford synfuel producers
tariff protection and to finance the crude oil “premium (price differential applicable to SA
oil purchases during the late 1970’s).
f. Fuel tax
Tax levied by Government annually adjusted by the Minister of Finance effective from the
price change in April of each year, announced in the Minister of Finance in his annual
budget speech.
g. Customs & Excise levy
A duty collected in terms of the Customs Union agreement.
The Road Accident Fund receives a fixed value which is used to compensate third party
victims in motor accidents.
i. Slate levy
A levy paid by the motorists recovering money “owed” to the oil companies, due to the
time delay in the adjustment of the petrol pump price.

The imporant thing to consider is that this is still business - no matter what the market price is, the distributors always have negotiation to decrease input costs.
For example, Sasol takes about 30% of their supply locally from South Africa which is cheaper to produce, yet they sell it at the full market price. At BP the franchisee should be buying BP supplied fuel... However, if he feels like going under the table he can ignore the contract and get some of his supply from another wholesaler who is cheaper. People take chances sometimes.
Further, what no one admits to, and is very hush-hush, is that fuel is not pure and often they throw in rubbish like parafin to make it higher in volume. Once the product of fuel used to contain 97/98 Octanes, no it only contains 93/95 Octanes. So forth.

9. Well at the moment ask yourself why? I cannot figure this out at all, we can make our own fuel products. South Africa was one of the first countries that could turn coal into petrol and yet we do not benefit?

Yes it is said that petrol prices will go down in the coming months but I think not. It is inevitable that we will soon be unable to buy oil because of scarcity.

The more pressing matter is that government is pushing for us to use public transport. I think not… Taxis are not regulated properly and they fail to pay tax as well as contribute to any system this include the e-toll project.

Why support something that refuses to give back to the community? Why use something that can potentially be unsafe? An example "driving while drinking alcohol? Loud speakers pumping out noise well over 85db that will damage your hearing? Not to mention a blatant disregard of traffic laws?

Why must any of this be acceptable?

Busses also have a bad reputation when you look at the media so again not safe… Trains is a hot spot for criminal activity and it is downright scary to use a train lately. Not to mention that in some arias they actually are steeling the actual train tracks…

10. "On April 4 2012 the fuel levy will be increased by 20c as part of government’s efforts to offset the reduction in toll fees along the Gauteng freeway." This was part of Minister Gordhan's budget speech earlier this year. Now that the e-tolling project is put on hold and maybe never going to materialize, shouldn't we get this 20c reduction in petrol price given back to us ?

11. Well there is good news!!
If the rand stays where it is and the oil price remains the same we should get a 53c reduction next month??

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