Petrol price calculation needs to be reviewed

Petrol price calculation needs to be reviewed

SERVICES NEWS

Business Live - Apr 5th 2012, 10:43

Comments by Department of Energy Officials that the mechanism for calculating the basic fuel price should be reviewed have been welcomed by the Democratic Alliance and the Cape Chamber of Commerce and Industry.  

Reacting on Wednesday to the comments made earlier this week, DA energy spokesperson Lance Greyling said government needed to take bold steps to bring down the fuel price, which was damaging prospects for growth and job creation.

Greyling said his party would request a meeting with the Minister of Energy, Dipuo Peters, and the CEO of the CEF, Mputumi Damane, to propose that the pricing formula be changed to cushion South Africans from dramatic price increases.

"The truth is that there is a great deal that government can do to reduce the petrol price. The dramatic 71 cents per litre increase could have been much lower if government used a more sensitive formula to determine the price," he said.

In the last 10 years, SA petrol prices have increased, on average, by 11% per annum.

"This rate is unsustainable, especially given its disproportionate impact on the poor. Consider, for example, that a litre of petrol cost R3.77 in Gauteng in April 2001. Today, a litre of petrol in Gauteng costs R11.94. If the trend continues, petrol would cost over R20 per litre in about five years," Greyling said.

Peter Hugo, chairman of the Cape Chamber of Commerce & Industry's transport portfolio committee, said fuel prices were based on what it would cost to import refined products from Europe and Singapore.

This, he said, was more expensive as the refined fuels were dangerous cargo and were usually transported in smaller ships, which had to pay high insurance premiums.

"It is cheaper to import crude oil in large tankers and refine it here but the benefits of local refining are not being passed on to business and the consumer," Hugo said.

Hugo said diesel prices were controlled at wholesale level and service stations were able to offer discounts. They would also offer discounts on petrol if they were allowed to do so.

Gordon Metter, deputy president of the chamber, said the increase of 38 cents in the basic fuel price was the result of high international oil prices, but the other 32 cents came from decisions which were difficult to justify.

"Twenty cents goes to the fuel levy and it will disappear into general government revenue, but it comes at the same time that the government is giving R5.8 billion to the Gauteng freeway project. This gives us the impression that business and motorists throughout the country are now being asked to help pay for the Gauteng freeways," he said.

According to Metter the next eight cents were for the Road Accident Fund which had a history of poor management and scandal. The final four cents a litre was to help pay for the new pipeline from Richards Bay to Gauteng, another project where the costs had soared way over budget.

"This means that 38 cents a litre of the increase will pay for the fuel while the other 32 cents will be, in one way or another, a payment for bad management," Metter said.