Next Wednesday, April 1, is petrol-and-diesel D-Day for South Africa. That is when the official fuel price adjustments for April come into effect - and right now the country is bracing itself. At the time of writing, the Department of Mineral and Petroleum Resources (DMPR) had still not announced the official adjustments. These are normally released towards the end of each month before the new prices take effect on the first Wednesday of the next month.
As is now well known, the Middle East war has played havoc with global fuel supplies and prices. In February, before the crisis, Brent crude was trading between $66 and $71 a barrel. Since the conflict began, the price has surged, hitting a high of $119 a barrel in mid-March following increased attacks on energy facilities in the region. At the time of writing, it is sitting at around $107 a barrel. That, together with the Rand/Dollar exchange rate, forms the two major external factors that determine the Basic Fuel Price. Added to that are the internal components: taxes and levies, retail and wholesale margins, storage and distribution costs, the Slate Levy that tracks under- and over-recoveries, and a range of other sub-inputs that ultimately determine what we pay at the pump.
What is important to remember is that petrol prices are strictly regulated by government. Diesel is different. While the wholesale price is set by Government, the retail price is not. Retailers are free to set their own pump price which is why diesel prices can vary significantly from one filling station to another. That, in itself, is normal business practice. What is not normal is what many transport operators say they have experienced over the past few weeks. One transporter described it as “unethical practices” by certain fuel stations that have hiked diesel prices by as much as R8.00 per litre - and this before the official end-of-month adjustments have even been announced.
The explanation from some has been that there is a diesel shortage. However, during a virtual meeting of the Fuels Industry Association of South Africa this week, a representative from the DMPR made it clear that “the current supply is stable”. Yes, an individual service station can run out temporarily, but that is very different from a national shortage. Which raises a very uncomfortable possibility: that some retailers are simply taking advantage of the uncertainty and pushing prices up unnecessarily. I decided to check two fuel stations in our area.
On Monday, the diesel price at one of them was R21.76 per litre. By Wednesday it had jumped to R27.50. Why? On Thursday I stopped there again and the price was back to R21.76. The attendant told me management had dropped the price again because customers were complaining and “people were angry”. He also said there had been no diesel shortage. Seems to me it was just greed.
Another service station in the same area told a very different story. Their diesel price - R20.73 per litre - has remained stable throughout the month. The manager told me they had received a notice from their oil company saying it was up to each retailer whether they wanted to increase prices ahead of the official adjustment, but that they would have to carry the consequences if customers felt they were being ripped off. Their decision was simple: wait for the official adjusted wholesale price. Hats off to them. So, from two fuel outlets in the same area, we saw two completely different approaches - one chasing short-term profit, the other putting customers first.
And here is the real point. South Africa is heading into a tough time. When the new prices are announced, the shock is going to be severe. Current estimates suggest increases of anything up to R10 per litre on diesel and close to R6 per litre on petrol. The impact will be felt everywhere. Transport operators are going to be under heavy pressure as will all businesses - and households are also going to feel the crunch as shelf prices rise. This is not the time for opportunism. If you had a genuine reason for increasing your diesel price, explain it openly. But if you were simply trying to make a quick profit before the official increase hits, then customers have every right to feel angry. In times like this, integrity matters more than ever and customers will remember exactly who stood with them and who cashed in.
We all need to stand together in facing the challenges coming our way. We need to show unity by linking hands to find the strength we are going to need. So do the right thing now and get on board to help row the South African boat through the stormy seas that lie ahead. Let’s do it.