The Fuel Retailers Association has scotched talk that deregulation will help reduce record-high fuel prices, and said the move would compound the problems facing fuel retailers.
Fuel prices have risen by 17% since November, and the increase would have been closer to 25% if it weren’t for the temporary reduction of R1.50 in the fuel levy, which resumes in August.
The department of mineral resources & energy (DMRE) and the National Treasury have said they intend to continue with consultations and proposals to remove the price cap on 93-octane unleaded petrol. If implemented, the move would partially deregulate the market, introduce more competition at the pumps and offer further relief to hard-pressed motorists.
“Deregulation is a buzzword in SA and it is seen as a solution [to high fuel prices] which it really isn’t,” the association’s CEO, Reggie Sibiya, said at a conference in Johannesburg on Wednesday.
Sibiya referred to the UK, where the sector has been deregulated yet fuel prices continued to increase. Petrol there costs about R32/l, compared with about R23.50/l in SA (after the temporary R1.50 reduction to the fuel levy), he said.
The government is under pressure because of rising fuel prices and the easiest thing to do, Sibiya said, “is to deregulate the market and make someone else accountable”.
The DA has also announced plans to introduce a new private members bill to parliament that will deregulate the fuel sector by making amendments to the Petroleum Products Act. But Sibiya said the industry wasn’t ready for restructuring and it would make matters worse for fuel retailers.
In the lead up to the 2010 Fifa World Cup, regulations that required all fuel purchases to made in cash were amended to make it easier for overseas visitors to pay for fuel.
As a result, motorists have been able to pay for petrol with their credit cards since 2009. Sibiya says this has been a thorn in the side of fuel retailers ever since because the 42c that credit card companies charge per transaction has never been accounted for in the fuel price.
“We are also seeing more non-compliance and illegal trading where wholesalers are selling fuel directly to the public,” he said, adding that the DMRE wasn’t doing enough to manage wholesalers’ compliance with regulations.
Motorists were also travelling less as a result of the high fuel costs, which has led to a drop in the volume of fuel sold — and this while the industry hasn’t yet managed to recover from the 80% drop in sales experienced at some filling stations during the Covid-19 lockdown, Sibiya said.
“On top of that we are seeing compromised margins [for fuel retailers]. In 2016 retailers were already under recovering 12c per litre and it is even higher now, [yet there is] still more pressure to cut margins by [deregulating the industry and putting us] in competition with each other,” he said.
External factors such as the dollar-based price of petroleum products, the prevailing rand/US dollar exchange rate and shipping costs account for about 54% of the basic fuel price, while levies and duties account for 27% and wholesale and retail margins for about 14%.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.