Energy minister Jeff Radebe appeared in Cape Town on Tuesday to brief MPs on the country’s high fuel prices.
Radebe said it was a fact that South African fuel prices have reached their highest ever recorded level – leading to concerns in government about the effect they may have on disposable household income.
He noted that a decision in 2016 by the Organisation for Petroleum Exporting Countries (OPEC) to cut 2% of the global oil production to support higher oil prices meant that oil prices across the world have now effectively doubled.
“South Africa imports 49% of its oil from Saudi Arabia, 24% from Nigeria and 20% from Angola. In January 2016, crude oil prices (were) below $30 per barrel. In 2018 prices are around $80. Oil prices have more than doubled in 24 months,” he said.
Other factors such as political turmoil in Venezuela, regime change in Libya, and a fluctuating rand has lead to the high fuel price, he said.
In response, Radebe said that South Africa has been intensifying fuel saving measures and has held a number of engagements with fuel producing countries to explain the impact the fuel prices are having on developing countries.
“Our policy as government is to apply a cost-recovery principle. (We) regulate petrol prices at retail level and for refineries to be cost efficient,” he said.
“South Africa is an importer of refined diesel and petrol. Prices are based on International Benchmark prices at key refining centres, and prices are subject to currency fluctuation as oil prices are quoted in USD per barrel”.
Department of energy deputy director-general Tseliso Maqubela added that deregulation was currently out of the question as there is insufficient infrastructure for wholesalers and retailers to compete.
“If you deregulate, owners could opt for self-service and we would lose those 50,000 jobs overnight. From where we stand we don’t think that is a sustainable position. There is also no guarantee that the price would come down,” he said.
Maqubela noted that South Africa also does not have the infrastructure in place to refine its own fuel.
“Currently, our refineries don’t have the capacity to meet our demands for fuel. That’s why we have to import refined diesel and petrol from other parts of the world,” he said.