Share

Petrol price truths

A QUESTION many ask with regards to the price of petrol in South Africa is: since Sasol produces its own fuel from coal, why can they not sell petrol to us at a lower price?

One source I found states that Sasol Synfuels (SSF) produces roughly 30% of the country’s fuel from coal, the remainder is produced via conventional crude refineries and so relies on the importation of crude oil.

Regardless of the amount of fuel SSF produces, its price is regulated under the Petroleum Products Act 1977 (Act No 120 of 1977). Therefore, Sasol cannot sell it at a price different to the regulated retail price.

The regulation of the retail price of fuel under the Petroleum Products Act, as amended in 2003 and 2005, means that the petrol pump price at all service stations in a pricing area must be the same, and no discounting – of any form – to the end consumer is allowed.

The deregulation issue

Subsequently, the next question becomes: can the petroleum industry be deregulated? Interestingly, deregulation “is inevitable [and] it will become a reality at some stage in the future” (department of minerals and energy, 1998).

Nearly two decades later, the industry remains regulated because government believes it needs to achieve socio-economic objectives first. In fact, government is still stuck in phase one because only in phase two is retail price regulation removed.

First, the following objectives must be achieved (taken verbatim from the 1998 White Paper):
• The sustainable presence, ownership or control by historically disadvantaged South Africans of approximately a quarter of all facets of the liquid fuels industry or plans to achieve this.
• Mutually acceptable arrangements between synfuels producers and the marketers of crude oil based fuels on the upliftment and marketing of synfuels.
• The introduction of necessary legislation to give effect to the cornerstones of government policy, including the protection of “full service” and the equitable participation of small businesses in the industry.
• The introduction of suitable transitional arrangements within the Service Station Rationalisation Plan.
• The introduction of any necessary institutional and regulatory capacity required to enable government to adequately monitor possible post deregulation distortions, and to enable it to act against such distortions.
• Suitable arrangements to address any labour-related consequences of deregulation.
• The introduction of suitable institutional capacity and measures to license and/or regulate oil and liquid fuel pipelines and possibly storage facilities if this is found necessary.

A presentation by L Kannemeyer (May 8 2013; available here) further highlights that South Africa has the tenth longest total road network in the world and the 18th longest paved road network.

Therefore, perhaps it is not so surprising that 25.5% of our fuel price goes to taxes and levies because our road network is longer than those found in first world countries such as Germany, Spain, Italy and Sweden.

With our heavy reliance on road transport, the need to maintain the road network is obvious - but when is government going to achieve the above objectives?

Consequently, if it takes more than 16 years to achieve phase one (of a three-phase process that appears to have been forgotten about), how long will it take before market forces are allowed to set fuel prices?

Sources:

Department of Minerals and Energy (1998). White Paper on the energy policy of the Republic of South Africa. Department of Minerals and Energy, Pretoria.

 - Fin24

* Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.


We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.97
-0.1%
Rand - Pound
24.10
+0.0%
Rand - Euro
20.61
-0.1%
Rand - Aus dollar
12.37
+0.4%
Rand - Yen
0.13
+0.5%
Platinum
906.50
-1.8%
Palladium
1,010.52
+0.4%
Gold
2,156.15
-0.2%
Silver
24.97
-0.3%
Brent-ruolie
86.89
+1.8%
Top 40
65,948
-0.5%
All Share
72,132
-0.4%
Resource 10
53,232
-0.2%
Industrial 25
99,741
-0.7%
Financial 15
16,581
-0.3%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders