A new Basic Fuel Price formula was introduced on April 2, 2003

The BFP formula replaced the In-Bond-Landed-Cost (IBLC) component of the pump price. The IBLC formula was introduced in the 1950s and was last revised in 1994. The formula change is necessary because a detailed investigation by the Department of Minerals and Energy in conjunction with the oil industry found that the previous formula had become outdated because of changes in global markets. A key finding was that it was more appropriate to use the “spot” prices quoted by an independent price reporting agency (Platts) rather than the refinery “posted prices” which had been used to represent longer term contract prices.

Like the IBLC, the BFP is conceptually an import parity pricing formula and it is intended to establish a realistic estimate of what it would cost to import substantial volumes of refined fuel. The most important difference between IBLC and BFP is that BFP is based on the spot prices quoted daily in international markets whereas the IBLC was based mainly on certain refinery gate postings which to a large extent have fallen into disuse and are no longer reflective of actual market prices.

The international spot prices used in the BFP are as follows:

The basic price of petrol will be based on 50 per cent of the price quoted in the Mediterranean area and 50 per cent of the price in Singapore.

The basic prices of diesel and illuminating paraffin will be based on 50 per cent of prices in the Arabian Gulf and 50 per cent of prices in the Mediterranean refining area.

The other elements of the BFP are:

  • Freight costs from these refining centres to South African ports;
  • Demurrage (loading and discharging waiting time for tankers at ports);
  • Insurance and minor shipping costs;
  • The allowed value for product loss through evaporation during marine transportation;
  • Wharfage (harbour landing charges);
  • Coastal storage to cover the cost of providing storage and handling facilities;
  • Stock financing.

A comparison between the IBLC and the BFP from 1996 – September 2002 has shown that the BFP has on average been lower by 4 cents per litre on 93 leaded petrol, 7 cents per litre on diesel and 10 cents per litre on paraffin.

The BFP is reviewed once a month based on the average over the prior month of the daily internationally quoted prices of petrol, diesel and paraffin. Since international prices are quoted in US$, the Rand/US$ exchange rate will always be a factor in determining local prices.

How the pump price is made up

  1. Basic Fuel Price +
  2. Government taxes and levies 2. (Customs and Excise Duties, Fuel Levy, Equalisation Fund Levy, Road Accident Fund Levy, Illuminating Paraffin Marker Levy).* +
  3. Wholesale Margin: (Cents per litre gross marketing margin set by an annual oil industry profitability review and subject to the approval of Minister).+
  4. Service Differential: (Covers oil company depot operating costs and road delivery expenses (from depot to customer) This is determined annually, subject to ministerial approval). +
  5. Zone Differentials: (Cents per litre costs of moving fuels from coastal port/refinery locations to inland distribution centres, by pipeline, rail or road. These are determined by individual Magisterial Districts and calculated by the oil industry, subject also to ministerial approval for inclusion in oil company wholesale price structures). =
  6. Wholesale Price: (The maximum price oil companies are permitted to charge service stations or wholesale customers for fuels). These are set each month and are the sum of all price structure elements except the petrol dealer margin). +
  7. Dealer Margin: (Cents per litre which Service Stations are permitted to add to the petrol price. The dealer margin is updated regularly and is subject to the approval of the Minister for Minerals and Energy). +
  8. Pump Rounding Factors (Ensures that oil companies do not gain or lose by charging wholesale price levels in whole cents and so that service stations recover the full dealer margin). =
  9. Retail Price at the pump

The above information is also available in pdf format (102 KB)

Examples of the pump price make up at the coast and on the reef are available in pdf format (101 KB)

Shaun Bakamoso

Greetings. I'm Shaun Bakamoso, and I'm thrilled to be your guide through the dynamic world of business news in South Africa here at mbendi.co.za. With a passion for staying informed and a keen interest in the ever-evolving landscape of business, I've dedicated myself to providing you with timely, insightful, and comprehensive coverage of the latest developments impacting the South African economy. bakamoso@gmail.com / Instagram