Economists shares concerns over structure of fuel prices

Some economists believe that the temporary fuel levy relief has once again exposed the urgent need to reform how the fuel price is structured.

This, after the government extended the fuel levy reduction by R3 a litre for petrol and R3,93 cents per litre for diesel.

Fuel prices are expected to go up again next Wednesday following a spike in the oil price amid fresh concerns about the uncertainty in the Middle East.

The government said that the fuel levy will be reintroduced by June, with the relief removed entirely by July.

Economist at ESG Analytics, Sifiso Skenjana, said that the move could prompt the long-overdue reform of the fuel price.

The domestic fuel price is heavily regulated with at least a third of the fuel price going to taxes, these are road accidents, carbon taxes as well as the big the general fuel levy. Additional costs include margins for petrol stations as well as storage and distribution costs.

The government has previously come under criticism for the heavy burden these levies place on consumers, with calls for reforms.

Skenjana said that if the uncertainty in the Middle East is prolonged and the price of Brent Crude oil keeps vacillating above a 100-dollar per barrel mark, the government could be forced to make the temporary measure more long-term.

"I think it is probably going to pressure the reform that needs to happen in any case around that fuel price or that fuel limit instead."

The estimated cost of the fuel levy relief from April to June will come at a cost of R17.2 billion in foregone tax revenue.

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