December 6, 2018 6:30 am
The Department of Energy yesterday released a discussion document on the review of the basic fuel price (BFP) structure for petrol, diesel and illuminating paraffin for public comment.
Although the document is highly technical and does not mention the deregulation of the fuel price, Business Report is aware of another discussion document that was sent to the South African Petroleum Industry Association (Sapia) about the possible introduction of a maximum price for 93 octane fuel.
This would introduce competition into the fuel retailing sector and allow the different service stations to set their own price, as is currently the case with the diesel price.
It would also provide a boost to Sasol, which was the only producer of 93 octane fuel in the country.
Avhapfani Tshifularo, the executive director of Sapia, said yesterday there was no consensus among the oil companies about the possible deregulation of the price of 93 octane petrol, adding there were those that were supportive and those that felt further work was needed on the proposal.
Tshifularo said Sapia was formulating industry comment on the BFP review discussion document, and this process was likely to be completed by mid-January.
But Tshifularo said the BFP formula was introduced in 2003, and a review of some of the elements, to see whether they were still addressing what was intended when it was implemented, was long overdue.
The National Association of Automobile Manufacturers of South Africa (Naamsa) is also in possession of the 93 octane discussion document.
Nico Vermeulen, the director of Naamsa, said the association subscribed to the principles of free enterprise and supported increased competition and deregulation of fuel prices, while accepting that the retention of the ban on self service would remain in place to protect the 90000-plus jobs in the fuel retail sector.
The discussion document on the review of the BFP said the price was based on the import parity pricing formula.
But it said the total amount of imported products versus the total products manufactured was not factored into the pricing formula to determine the prices in South Africa, because the BFP was a deemed pricing mechanism that assumed there were no refineries in South Africa.
In reality, there were four refineries and two synthetic fuel refineries in the country that produced 80percent of the petroleum products to meet local demand, with the 20percent balance met through importation, it said.
The discussion document concluded that the import-parity pricing principle should be maintained for imported petroleum products, but the BFP should be “un-deemed to reflect the actual cost of landing products at South African ports”.
Changes are also proposed to several cost inputs used to inform the BFP formula, including the free-on-board value of products in selected reference markets; freight costs; insurance; ocean leakage and evaporation; cargo dues; demurrage; stockholding costs; and financing costs.
The deadline for the submission of comments on the discussion document is January 31, 2019.
The department said it was envisaged that the revised BFP formula would be implemented next year after consultation with all stakeholders.
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