Energy Minister Jeff Radebe has lamented the sharp rise in the petrol price but has not announced any concrete plans to douse the situation. He says a cluster of Ministers has been seconded to see what government can do to mitigate high petrol prices.
He expects the Ministers to report back to Parliament and government by the end of September.
Radebe on Tuesday told Parliament’s Portfolio Committee on Energy that he was very concerned about the effect the high petrol price was having on household incomes and on the economy overall.
“Resolving this is not a quick-fix and requires multi-dimensional efforts,” Radebe said.
The petrol price has climbed to its highest level yet. It has risen from R14.42 per litre of 95 octane unleaded petrol inland in January to R16.03 a litre in August. The petrol price is currently R15.54 a litre on the coast.
The Department of Energy (DoE) has also ruled out deregulating the industry for now, partly as it would threaten the jobs of up to 50 000 petrol attendants if petrol station owners opted for self-service.
“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,” said DoE deputy director-general Tseliso Maqubela.
Radebe blamed the high price mainly on international factors, particularly an increased international crude oil price and the sharp rand/dollar exchange hike over the past few months.
Oil prices have more than doubled in the past 24 months. In January 2016, the crude oil price was below $30/bl. In November 2016, the Organisation of Petroleum Exporting Countries (Opec) and key non-Opec producers removed 2% of global oil production to support higher oil prices. Currently prices are around $80/bl.
Other factors included instability in oil producing nation, Venezuela, where political turmoil has led to the near collapse of oil production, as well as intermittent oil production in Libya, where production has dropped from 1.5-million barrels a day in 2011 to 600 000 bbl/d. US policy and US sanctions towards major oil producer, Iran, have also impacted on the crude oil price.
On the local front, the fuel price levy and Road Accident Fund (RAF) levy make up nearly one-third of the pump price – a figure opposition political parties are not happy about.
“There have been increases in the RAF and the fuel levy in this year’s budget by the Minister of Finance, which you Parliamentarians approved,” Radebe told Parliament’s Portfolio Committee on Energy.
Maqubela explained the composition of the pump price.
“The fuel levy sits at R3.37 a litre, and the RAF levy at R1.93 a litre. These are by far the costs that are significant, but also the retail margin which is R1.57 a litre. That is what goes to the retailer. In the value chain, each of these players has to get a marginal cost of transporting and doing business. We are looking very closely at the demand-supply management chains.”
Democratic Alliance energy spokesperson Gavin Davis criticised the high fuel levy and said neighbouring countries were paying far less for their petrol than South Africans were.
“Neighbouring countries don’t have the exorbitant fuel levies we have, and that’s why they have much cheaper petrol. We need more detail about the time frames and review with the National Treasury on the levies. The last budget saw a 7% increase in fuel levy, and 15% in the RAF levy. That is hugely above inflation. We ask the Minister to consider talking to the Minister of Finance and ensuring that there’s no above inflation increase in February,” said Davis.
He also said the RAF was "corrupt and mismanaged" and had recently reported to have rented office chairs for its headquarters at R1 600 a month each.
“How can we justify paying the levy when it is so profoundly mismanaged?”
Maqubela said South Africa’s infrastructure and road network was far more extensive than those of its neighbours and that the fuel levy was therefore needed.
Radebe said it was vital for South Africa to try and find its own crude oil and gas.
“We have to finalise this framework for exploration of oil and gas. We hope the shale gas in the Karoo will happen.”
Saudi Arabia accounted for most of South Africa’s crude oil imports in 2017, at 49%. Nigeria accounted for 24% and Angola 20%. Ghana, Cameroon, the US and Equatorial Guinea contributed 1% each, with Togo bringing in 2%.