Des Erasmus

For students, a fuel hike is not just bad news for those who drive to campuses. It can mean pricier taxi fares, more pressure on family budgets, and less room for basics like food, medicine, and study costs.

From 1 April, petrol increased by R3.06 a litre, while diesel increased by between R7.37 and R7.51 a litre. The temporary R3-a-litre fuel levy cut by the government — introduced only for April — is meant to soften the blow.

Many students already operate within tight transport budgets and depend heavily on public transport. Taxis are the main mode of travel to post-school education and training institutions for 42.2% of students overall, with buses accounting for 12.1%, according to Statistics SA.

Treasury has already flagged concern about fuel’s knock-on effect on food and transport inflation, and Stats SA says transport remains the third-largest category in the consumer inflation basket.

In other words, a fuel shock is not confined to motorists. It can ripple through the everyday costs students face, from taxi fares to the price of basic goods.

So, how exactly is the country’s basic fuel price calculated?

The amount paid per litre is not simply the cost of the fuel in the tank. It is built up from a formula that starts overseas and ends with a long list of local transport costs, margins, levies and taxes.

According to the Department of Mineral and Petroleum Resources, South Africa uses an import parity model to calculate the Basic Fuel Price, or BFP. In simple terms, this means the country prices fuel as if a substantial share of its liquid fuel needs had to be imported from major overseas refining centres.

The department says this system is meant to reflect the realistic cost of importing fuel and to ensure that local refineries compete with international suppliers. Petrol prices are therefore linked directly to prices quoted in US dollars at export-oriented refining centres in the Mediterranean, the Arab Gulf and Singapore.

That means the BFP is shaped first by three major global factors: international crude oil prices, international supply and demand for petroleum products, and the rand-dollar exchange rate. If oil prices rise, or if the rand weakens against the dollar, the basic fuel price usually comes under pressure.

The international calculation also includes freight costs to bring the fuel to South African ports. Added to this are fines for shipping delays, insurance, ocean loss during transport, cargo dues for using harbour facilities, coastal storage, and stock financing.

Once all of those costs have been added, the BFP is converted from international units, such as barrels or tons, to cents per litre using the applicable exchange rate.

Domestic factors are then added on top of that. These include inland transport costs to move fuel from the coast to depots and inland markets, the wholesale margin paid to marketers, and the retail profit margin paid to service station operators.

Government charges are also a significant part of the final price. These include the General Fuel Levy, the Road Accident Fund levy, the Carbon Fuel Levy and the Customs and Excise Levy.

Then there is the Slate Levy, which works as a balancing mechanism. Because the daily BFP can be either higher or lower than the official fuel price structure at the time, over-recoveries and under-recoveries build up over a month. If the balance turns negative, a Slate Levy can be imposed to recover the shortfall.

INSIDE EDUCATION