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Bruce Whitfield: Here’s why there is no escaping high petrol prices – and what government can do to make it better
Bruce Whitfield , Business Insider SA Jul 04, 2018, 01:03 PM
- Government controls two out of the three factors that affect the price of petrol.
- Tax on petrol is a tax on consumption – so it is not likely to go anywhere.
- But there is one key thing the government can do to make the recent increases bite less.
Petrol this week went through R16/l in Gauteng. And if current trends persist, it will rise again next month. As Business Insider pointed out this week, the price of a liter of petrol has more than doubled over the past decade, including the 165% increase in fuel taxes.
Government is scrambling for an explanation and I see this morning that Ebrahim Patel, the well-intentioned but economically-misguided minister of a ministry euphemistically entitled “Economic Development”, has sought to distance his government from the rampant increases in fuel costs.
That is a bit like a drunk driver blaming the car for hitting the tree. Government directly affects the price of petrol. Tinkering with the pricing model, though, could have consequences you probably wouldn’t like very much.
The price of a liter of petrol in South Africa increased from R6.92 in July 2008 to R15.53 in July 2018 at the coast, and from R7.16 to R16.02 inland – nearly tripling in the last decade. Over the same period, the tax (or fuel levy) on a liter of petrol increased from a low of R1.27 in July 2008 to R3.37 in July 2018. This means the tax on fuel increased by 165.35% in ten years
The fuel price is subject to three different factors, two of which government can influence.
Read the rest of this article on the Business Insider website here