Cape Town - MPs on Tuesday received a lesson on how the basic fuel price is determined, and how a legacy from the apartheid era still affects the petrol price at local service stations, according to a Business Report article published on IOL
One of the factors affecting the basic fuel price cost is the expense of transporting fuel across continents. A 15% premium was placed on shipping fuel to South Africa during the apartheid days, and this has remained in force.
The freight element is fixed by the London Tanker Brokers’ Panel, an independent authority which provides a variety of rate assessments on a fee-paying basis for individual oil companies, traders, tanker operators and other interests worldwide.
Robert Maake, a chief energy department director, told MPs serving on the National Assembly’s energy portfolio committee: “It could have been out of the [anti-apartheid] embargo.”
He promised to review this cost element to see if it was justified, and whether it should be a part of the pricing system.
His colleague Muzi Mkhize agreed that “we need to get down to… the terms of the basic fuel price”. When asked if the price would be reduced, he said the question was premature and he did not want to create any expectations.
The basic fuel price - according to the energy department - is based on the import parity pricing principle, in other words what it would cost a South African importer of petrol to buy the fuel from an international refinery.
Cabinet appointed the Central Energy Fund in 1994 to determine basic fuel prices. According to Mkhize, the fund is meant to be impartial.