The petrol price is budgeted for and set by the government using a formula known as the Basic Fuel Price Formula (BFP). This formula is used to work out the various cost factors making up the petrol price. It is comprised of a bunch of factors including the international spot prices and transport and insurance factors. It has been announced that the petrol price will be going up on midnight Wednesday the 3rd of June 2009 by 16 cents per litre, due to the strengthening of the Rand and the higher spot prices this causes. So what does this mean?
- Filling up VW Polo costs R7.20 more
- Filling up a Toyota Hilux DC costs R25.60 more
- Filling up a BMW 3 Series costs R9.76
These may seem like small amounts but remember that everything adds up and if you do a lot of travelling by car then even a small increase in the petrol price can lead you to having less money to spend on other things. Again, as with all finance it is extremely important that you plan a budget. As the petrol price increases you reformulate your budget to reflect the new prices that you will be paying. This way you can always be sure how much money you have and what you can spend it on. The petrol price increase this time around is apparently due to the strengthening of the Rand against international prices this changes the amount the SA has to pay for fuel. However this does not take into account locally produced petrol.
SASOL produces 40% of the petrol price in South Africa. This means that 40% of our petrol is not in fact moved by movements in the Rand. So this BFP in effect amounts to a subsidy for the petrol firms as SASOL states that 70% of their fuel is sold to other oil companies in South Africa. We the consumer are over paying, but because the petrol price is set by government we can't vote with our feet by taking our business elsewhere. There is in effect no competition in this market and both the consumer and small retailer suffer for it. The large oil companies are still making massive profits and we are the guys paying for it. The BFP is an historical anachronism that should be revisited in order to make the petrol price closer to its component cost realities.
Late Breaking News: The increase has been increased with no explanation given to 17c per litre of petrol