Petrol is coming down

Petrol prices are set by the government. This is to take into account currency fluctuations and ensure that petrol prices are consistent across the country. The Department of Minerals and Energy is the office that is responsible for setting the petrol price. They announced some good news on Friday the 31st of July 2009. The petrol price is to drop from Wednesday the 5th of August by 21 cents per litre and the diesel price is to drop by between 20 and 21 cents per litre depending on grade. So how do they work it out?

• Rand/Dollar rates are averaged
• Transport is factored in
• Coastal and inland prices vary

The government has also recently allowed petrol stations to sell petrol and accept payment via credit cards. This was previously not allowed as the extra charges associated with credit cards could be seen as skewing the market and giving benefit unfairly. The World Cup is coming however and the government has decided to allow us to buy petrol on credit much like the rest of the world. Not all petrol retailers are ready to do this though as they will have to absorb the extra transaction costs of accepting credit cards.

The petrol price is mainly governed by currency fluctuations and the variable cost of bringing petrol into the country and then transporting it to the forecourt. This does not take into account that we manufacture petrol here in South Africa and that the bulk of it goes to local petrol companies. The gap between what we import at a certain price and what we make at a lower price can be seen a profit taking, or at least as a skewed petrol price that favours big industry rather than the consumer. While the petrol price cut is to be welcomed, it is still not particularly related to real prices.