Cape Town - The price of petrol is set to increase again
this week, with 95 ULP rising 41 cents to a record high of R12.27 per litre,
leaving motorists exasperated at the effect on their wallets.
But it is petrol station owners that may feel the pinch even
more, as fuel price hikes are just as bad for business when your business is
Leslie Mitchell, MD of Garagesure Consultants &
Acceptances says, “A petrol retailer’s profit is fixed for every rand of fuel
sold, regardless of the fuel price. Fuel price increases do not mean that your
local fuel retailer makes more money – potentially the opposite.”
“When the fuel price rises by a significant margin, the R200
that bought 18 litres of fuel is now maybe only buying 16 litres. Many people
will rather travel less than pay R20 more for fuel, which in turn has an effect
on the volumes being sold by fuel station owners and results in lower spending
in the convenience stores at the petrol station forecourts.”
There is also the problem of being suddenly under-insured on
the value of the fuel inventory a petrol station is holding. The price of fuel
has a significant effect on the value of fuel inventory at petrol stations.
example, a petrol station with a 100 000 litre tank capacity of 95ULP would
have had a fuel inventory value difference of R335 000 in January 2010 versus
This would mean that the owner of the petrol station could
have been 30% under-insured for this brand of fuel – a potential disaster in
the event of a fire.
For petrol station owners, it is always advisable to make
sure that their sums insured are accurately reflected on their policy
schedules, but this can become administratively intensive when there are
sometimes monthly changes to the price of fuel.
Mitchell advises petrol station owners to double-check their
insurer’s criteria relating to fuel price increases. He adds, “As an insurer in
this niche market, we understand the impact of fuel price adjustments and would
not apply average to fuel inventory, provided that the sum insured value stated
on the schedule is within a 10% margin.”
And what about the actual cost of a delivery of petrol when
the price has just gone up again? “Dealers or franchises have contracts with
their oil companies that compel them to keep a minimum fuel inventory level, so
it is inevitable that your fuel inventory purchase will increase or decrease
with fuel price fluctuations.”
In addition, increases could put a petrol station owner’s
cash flow under pressure, as some pay for their deliveries using cash up front.
To use a simple example: take a petrol tanker with a maximum load capacity of
34 tons (34 000 litres). At the current price of R11.86c (95ULP) the load would
cost R403 240.
If the price goes up by 41c, the same load would cost R417
180, or R13 940 more – a hefty amount of emergency cash to have available!
“A solution would be to speak to your brand about fuel
guarantees that are available in the market and which are accepted by them.
This could help ease the extreme burden of a cash upfront purchase.”
“Consumers may often feel that they are getting short
changed with regards to their fuel consumption but the reality is that many of
those working within the industry, particularly the petrol station owners, are
also feeling the financial impact of the continuing spikes in fuel prices,”