From 2011 to June 2018, local fuel price have grown by over 8% annually while Brent Crude Oil Price (in dollars) shrunk by over 2% per annum in the same period. Follow the link to download Part 1 of a series unbundling the nature of our local fuel prices.

1. A GreenMovement
Approach: South African
Fuel Prices
Part 1
7/2/2018

2. 1
The data used in this study was taken from the Department of Energy’s online archives.

3. 2
Recent fuel price hikes have caught most of us with our pants down. At a time when many South
Africans are feeling pressured by the economic environment that surrounds them, we believe that is
important to reflect on the journey that brought us to this point. A lot is said in the public domain
regarding the price of the fuel that transports many of us from home to work and back again; and
we pondered a means of interpreting what information was readily available into a working
examination of the levers that drive our fuel prices.
What can you remember about the year 2011? Our story starts there with the data available. Past
fuel prices were retrieved from publicly available Department of Energy archives and analysed to
observe changes over the years. To give some insight to the vast changes that fuel prices have gone
through, in January 2011, the inland price of Unleaded 95 Petrol was R8.58. As of June 2018, the
price was R15.79, a 185% escalation in the price over that period. The inland price of 0.05%S Diesel
escalated by 181% from R7.84 in January 2011 to R14.19 as of June 2018.
One may have noticed that the actual prices are not indicated in the previous figure. What is shown
is an index that represents prices as a ratio of an index (or reference) price within the series of data.
This makes it less difficult to visualise prices in an interpretable manner without losing the integrity
of the data set. Within this study, prices at Jan 2011 were chosen as reference prices as this was the
earliest date in our data series. You may also be asking what the Brent Crude Rand Spot Index
indicated on the previous graph means. This is simply an index of the monthly average Dollar Brent
Crude Price converted into Rands through the monthly average Rand/Dollar exchange rate. Oil prices
grew by 153% in rand terms from R626.40/Barrel in 2011 to R960.76/Barrel in June 2018.
The previous figure shows the consistent tracking of local fuel prices with the Brent Crude price in
rand terms. This was confirmed through a statistical analysis that indicated a very high correlation
between local fuel prices and Brent Crude prices in Rands. Thus, fundamentally, what is commonly

4. 3
said in the public about the driver of fuel prices seems to be true: prices are driven by the cost of
“Oil” with respect to the strength rand. It is also clear that the growth in petrol prices outpaced
diesel prices and oil prices significantly, a topic of discussion in future discussions of local fuel prices.
The figure above indicates how Brent Crude prices have remained below the price in January 2011
($91) till June 2018. The average Brent Crude price in the red area was in the region of $110/Barrel
while in the green area, it averaged at $53/Barrel. That is a 48% decrease after the sharp decline in
oil prices during the last 6 months of 2014. With all this said, one may ask why South Africans did not
benefit from the emergence of “cheap oil” to date.
Remember how we explained the derivation of the Brent Crude Rand Spot price? If not, read further
up. One of the components include in the calculation was the Rand/Dollar Exchange Rate and unlike
oil prices, our exchange rate took a different trajectory in the observed time period.
From 2011 till February 2016, the strength of the Rand consistently weakened (R7/$ to R16/$). The
graph indicating this phenomena heads upwards showing the increase in the amount of Rands
required to purchase a single Dollar. After February 2016, the strength of our currency showed signs
of recovery until the price returned to mid-2015 levels. After that, weakness renewed in the strength
of our currency from around March 2018.

5. 4
Unfortunately, the recent weakness in the Rand occurred simultaneously with a recovery in oil prices
resulting in sharp and concurrent fuel prices increases over the past 3 months. Remember, our
country is a net importer of crude oil by a significant margin. Fundamentally, the cost of the raw
material that becomes the fuel we rely so heavily upon is not within our span of control. If the shape
of our economy does not appeal to the world at large (or ourselves in particular), the base cost of
fuel in South Africa will work to our disadvantage whether the Brent Crude price is high or low.
This has been a brief gaze into some of the mechanisms at play when fuel prices are discussed. We
acknowledge two things in this study.
Firstly, our observations may not be the most precise from an analytical perspective; however, we
believe them to be accurate in describing what has occurred within the level of detail shown. We
aimed to bring this information to the public in a manner that is simple yet verifiable. Secondly, the
commentary in this study may leave the reader with many more questions regarding the nature of
our fuel prices than what can immediately answer. We must admit that this is intentional.
We have embarked on a fact finding journey to unbundle some of the mystery behind a commodity
that impacts all of our lives in more ways than most of us realise. We look forward to debates,
opinions and questions regarding this study and those that will follow; in the hope that many more
South Africans will join this discussion to the benefit of our society.
GreenMovement is passionate about energy, particularly in the context of our nation and we aim to
bring insights and solutions to the forefront which make a difference in each of our lives.