Fuel wholesalers call for SA to get refineries up and running again

The Liquid Fuels Wholesalers Association of South Africa (LFWA) yesterday called for South Africa to get its refineries up and running again, build up strategic stocks and create an agreed plan going forward on how to keep the country supplied.

The organisation, which has 32 members, who are entrepreneurs engaged in activities relating to the wholesaling of liquid fuels in South Africa, also wants a full review of all fuel cost recoveries/margins, with an independent oversight.

This follows the price of petrol breaching R25 per litre for the first time ever yesterday. Fuel prices in South Africa have risen 20 percent since the beginning of the year, and around 40 percent from a year ago, due to Russia’s invasion of Ukraine, strong consumer demand and weak supply.

This as the price for 93 octane yesterday rose to R26.31 per litre, while 95 octane increased to R26.74 per litre. Diesel is now between R2.30 and R2.31 per litre more expensive, while the wholesale price of illuminating paraffin is up by R1.66 per litre.

Peter Morgan, the chief executive of LFWA, said the focus should be on sustainability of the industry now, and not when it was too late.

LFWA said volumes were beginning to increase post-Covid, however, the massive price increases had stopped this.

He said the diesel and illuminating mixing (adulteration) was also killing the good operators.

The zone differential reduction in May – due to what Morgan called the “incorrect information given to Department of Mineral Resources and Energy” – was putting independents in a bankrupt trading environment with constant requests for regulation change, he said.

Morgan said it was well recognised that currently Africa was suffering disproportionate pain due to the global fuel price situation.

“We believe the same principle should apply in South Africa – we must all suffer proportionately. However, having said this, we know there is no flow through mechanism in the current price model.”

“There is also a deliberate averaging in the current price model (secondary storage and secondary distribution) and this needs to be understood by all stakeholders,” Morgan said.

Morgan said the LFWA had been accepted to the Department of Energy’s Regulatory Accounting System Working Group meetings from August 2012.

LFWA made numerous written submissions to the Department of Energy and other stakeholders, which meant all stakeholders were now fully aware of the current trading environment that faced the independent wholesalers.

The LFWA said the industry should be governed by a common commitment to promoting a climate that would be conducive to reasonable profits and sustained investment in the liquid fuels industry, through legislative and regulative means.

Meanwhile, Fuel Retailers Association (FRA) chief executive Reggie Sibiya said that the high fuel prices was a global crisis and different countries were finding different solutions according to their socio-economic situation.

“Currently, credit cards are our biggest nightmare right now because a credit card transaction is now costing 46 cents per litre (cpl) and is not compensated for in the margin.

“The allocated profit margin on a litre of petrol before any clawbacks is 31 cpl, which means every credit card transaction for fuel is at a major loss to retailer profits. If things continue this way this is not sustainable and can land us in a situation where product supply is becoming too costly and this in turn will affect security of supply which is definitely not the problem any South African wants to be in,” Sibiya said.