THE rapidly increasing price of fuel has made a review of how petrol and diesel prices are determined both urgent and essential, says the Cape Town Regional Chamber of Commerce and Industry.
The price of petrol is expected to go up by nearly 90 cents a litre next month while diesel will go up by more than 60 cents.
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Mr Fred Jacobs, President of the Chamber, said the system was devised a long time ago in different political and economic circumstances and we should ask whether the formula was still appropriate today.
“Business is particularly concerned about the price of diesel which is a basic input cost for agriculture and transport. It affects the price of every item of food in the supermarket,” he said.
Mr Peter Hugo, chairman of the Chamber’s Transport portfolio committee said the Energy White Paper of 1998 recommended that taxes on diesel fuel should be reduced. At the time diesel was the cheaper fuel and the White Paper said “This price differential promotes the use of diesel which is a more efficient fuel and also lowers input costs for productive activities.
“Liquid fuel pricing policies provide an opportunity to influence the fuel mix in order to support economic activities, constrain leisure activities and promote public transport. This can be achieved by adjusting taxation levels to provide appropriate price signals.”
Mr Hugo said the situation had worsened in the last 15 years and diesel was now the more expensive fuel despite the fact that it was the cheaper one to produce. “This should make us review the way the diesel price is calculated and also the various taxes on diesel. The government thought there was a good case to reduce taxes on diesel in 1998 and we think there is an even better case now.”
He said the formula for calculating fuel prices was a complicated one and there should be scope for improvements and adjustments to bring it into line with changing circumstances.