Fuel retailers want slow deregulation

With only 36% of the South African fuel demand met by locally produced synthetic fuels, the country is still largely reliant on products derived from imported crude oil. This has left the country vulnerable to fluctuations in crude oil prices and exchange rates.

Pick n Pay chairman Raymond Ackerman has been at the forefront of calls for deregulation — the complete removal of government regulations — of the local petroleum industry.

But last week's oil summit, called by the minerals and energy department to discuss problems facing the oil sector, hinted on a gradual liberalisation of the market “instead of the big-bang approach,” according to the department's statement. In a statement on the outcome of the two-day summit, the department said pre-conditions set out in the 1998 white paper on energy policy had not yet been totally met.

Fuel Retailers' Association CEO Peter Morgan yesterday said the time was not right to deregulate the local market. “Government regulation must be given time to continue. Deregulation, at the moment, will not be in the interest of motorists. It could lead to a bloodbath of new players,” he said.

In a presentation at the summit, Morgan said SA was not ready for an immediate deregulation.

He advocated a deferred deregulation, instead of an “overnight” deregulation. He said an “overnight” deregulation would harm small, medium and micro enterprises (SMMEs), lead to job losses for about 40% of the industry's 58000 employees, and even higher prices.

Morgan said that the deferred deregulation or time-locked managed liberalisation over seven to 10 years would give the local market enough time to allow for natural attrition to reduce the overproliferation, instead of the bloodbath likely in the event of an immediate deregulation.

New entrants would be given time for the appropriate transfer of skills and knowledge, he said.

An “overnight” deregulation could also hamper security of supply to rural towns, he said.

“It costs wholesalers more from both the distribution and retail perspective to sell fuel from small volume sites, particularly in outlying areas.

“Therefore, customers in these outlying areas will have to pay more to make a small volume service station sustainable,” he said.

To avoid that, the association proposed minimum and maximum prices in demarcated areas.

“What we do not want is business shifting from rural and previously designated areas into the urban areas,” he said.

The 1998 white paper on energy said the liquid fuel industry should be characterised by minimum government intervention and regulation, with the hope that such a move would promote healthy competition and investment in the industry.

The government's control over the different petroleum products varies.

Jet fuel, diesel and liquefied petroleum gas are partially controlled, lubricants are completely competitive, while petrol and illuminating paraffin are controlled.

Source: Business Day

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