South Africans are reeling from yet another hefty fuel price hike, but the reality is that our petrol price is cheaper than the world average.
The average price of petrol around the world is R26,11 per litre of 95 Unleaded, but here we are paying an average of R25,32.
Some other countries are forking out more than R59,00 per litre and we by no means have the highest fuel price in Africa either; so why are we feeling this hit harder than other countries with more expensive fuel prices?
The answer lies in a number of factors that actually make comparisons of fuel prices not reflective of their impacts.
As a general rule, richer countries have higher prices while poorer countries and the countries that produce and export oil have significantly lower prices, explains GlobalPetrolPrices.com, which tracks the national average prices in 150 countries and more than 250 cities globally. One notable exception is the United States which is an economically advanced country but has low petrol prices.
“The differences in prices across countries are due to the various taxes and subsidies for (petrol). All countries have access to the same petroleum prices of international markets but then decide to impose different taxes. As a result, the retail price of (petrol) is different.”
The data ranks South Africa as being 96th on the retail fuel price list (95 Unleaded), which means that prices are higher in 95 other countries. Conversely, there are 74 countries on the list with cheaper fuel prices.
Many of us have friends and family in countries like New Zealand, the United Kingdom, and Ireland, and while we no doubt hear their complaints about the cost of fuel, the impact that it is having on us appears to be more brutal. This is despite the fuel prices in these countries being R35,89, R36,28, and R37,21 respectively.
While comparing fuel prices across countries is not an accurate reflection of its impact on consumers, FNB senior economist John Loos explains some of the general factors that need to be considered when working out the true cost of petrol on our pockets – which are ultimately not as deep as other countries’.
Firstly, you need to take into account a country’s Per Capita Income (PCI), which is calculated by dividing its total annual income by its total population. For many of those countries with higher petrol prices, like the UK for example, the PCI is higher; there are more ‘poorer’ people in South Africa than the UK, and what may be considered poor in that country is not necessarily equal to our definition of poor, he says.
Using data from the International Monetary Fund (IMF), we compare the petrol prices in some countries popular with South African expats, with their PCIs. This shines a brighter light on why we are feeling these fuel price increases so severely.
In addition to the PCI – which is the most accurate reflection of the varying fuel price impacts, you need to take into account other things that affect what citizens of different countries need to spend their money on. As an example, Loos says the UK has a very efficient public transport system, and this method of transport is more fuel-efficient than private transport. There are also public transport subsidies.
“The UK has a national healthcare system so people don’t need private medical aid. They probably also don’t need private security and armed response. So even if they use private vehicles there, the fuel price, while it probably is a concern, does not have as much of an impact as it does here.
“We’re just not really comparable.”
Another issue in South Africa, he says, is the apartheid legacy of many poor people living in far-flung areas, away from the cities. For this reason, they have to travel further to get to work and when the petrol price goes up, so do taxi fares.
“So these people are ultimately left with no room to move.”
Other things that can be said of the UK, as well as many other developed countries which may have higher fuel prices, is that they get better value for their tax bills, and their services are relative to their tax rates, which is not the case here.
On the other hand, people in the UK pay higher property prices than we do, so Loos says these costs are probably pressuring them more. Still, that country does not have nearly as many people living on the bread line as South Africa does.
Using the same data from GlobalPetrolPrices.com and the IMF, these are the highest petrol costs in the world and the respective countries’ PCIs.
The table below also shows how South Africa’s fuel price and PIC compares to some other African countries.
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