Perfect storm to hit motorists in South Africa

South Africa is at a tipping point in terms of petrol supply, and immediate changes need to be made to secure supply before the end of the year, says Peter Morgan, the chief executive officer of Liquid Fuels Wholesalers Association.

Speaking to ENCA, Morgan said that if fuel stocks are not built up in the country, consumers could face ‘fuel shedding’.

He said the lack of domestic fuel reserves paired with the practice of rationing petrol to certain areas, issues of the pricing methodology for petrol not being in favour of independent wholesalers and the overreliance on importation – combine to create the perfect storm that threatens fuel security in South Africa.

Industry figureheads and civil society organisations have pushed for the South African government to consider restocking its reserves as outlined in the Moerane commission from 2006 – such pleas have, however, not been taken into account.

Morgan said that South Africa is now in a position whereby it relies almost solely on importing oil and, with little to no refining capacity, is at the whims of global forces and possible delays if shipments encounter problems – thus increasing the risk of supply shortages.

Oil imported to the country is on the water for about three to six weeks sometimes, and it can arrive off-specification or be delayed because of bad weather, to name a few instances.

“What we have come to learn is that when there is a delay that larger producers keep the majority of the product for themselves while they ration the supply for independent wholesalers,” Morgan said.

Most of these wholesalers are located outside of urban areas in South Africa and are less attractive to oil distributors as the transport costs of getting the product to them are often much higher than a coastal plant, for example.

Morgan added that the rationing of petrol to such areas has knock-on effects on motorists, especially those in smaller towns or agricultural areas.

Opposition party Democratic Alliance (DA) shared the same sentiment, warning that the country is on the edge of a fuel crisis as there is an unavailability of refined fuel stocks.

The party said that in light of the recent strike at the country’s national port and freight company Transnet, which put the importation and exporting of critical goods on life support, backlogs are only projected to be relieved next year.

In May of this year, Bloomberg reported that South Africa’s reliance on imported fuel would only increase more over the next year – tripling as domestic refineries close or fall out of operation.

Energy consultant company Citac told the publication that with the closure of refineries – there would be more petrol and other fuels being imported. Product pipelines from the port of Durban, where fuel is imported, may need to be modified to adjust to more supply, Citac added.

Upcoming petrol price

The latest data from the Central Energy Fund (CEF) points to a 48 cents per litre hike for petrol and a jump of around R1.61 per litre for diesel. Judging by the current exchange rate and international oil price, the latest fuel price projections for November are as follows:

• Petrol 93 & 95 will go up by 48 cents per litre;
• Diesel 0.05% will go up by R1.61 per litre;
• Diesel 0.005% will go up by R1.64 per litre;
• Paraffin will go up by 78 cents per litre.

Fuel price changes will come into effect on Wednesday, 2 November, with an official announcement expected in the coming week.

Read: The businesses hardest hit by liquidations in South Africa right now.