Petrol would be on sale tomorrow at a saving of up to 35c a litre if Kempton Park garage owner Dean Grant could get his way.
Grant, at the forefront of discounting diesel for the past 18 months, offers discounts of between 27c and 30c a litre. Grant is able to do this because the retail price of diesel, unlike petrol, is deregulated.
He would cut the price of petrol tomorrow by between 25c and 35c a litre if he could: “For sure, I would like to discount petrol,” he says.
The dealer margin on fuel is 40c a litre. Total sales this year are expected to be 18-billion litres, with the country’s fuel stations turning over about R4,6-billion.
Motorists consume 11-billion litres of petrol annually, most of which is sold through fuel stations. A further seven-billion litres of diesel is used annually, but only one-billion of this is sold through service stations.
Grant gives away much of his 40c a litre to drive more business. The strategy is working: his diesel sales have more than doubled from 180 000 litres a month to 400 000 since he started discounting.
There is renewed focus on South Africa’s highly regulated fuel market as oil prices this week topped $70 a barrel, up by over 100% from $30 a barrel in December 2003.
Five garage owners canvassed by the Mail & Guardian recently, had different views on the deregulation of petrol. One said deregulation would force the smaller players out, another said increased competition would be good, while a third said he would collude with other garage owners to fix the local price (see sidebar).
Competition Commission compliance division manager, Zodwa Ntuli, says there is potential for competition in the fuel industry and it could be brought about by systematic deregulation, but current government regulation means that the commission’s hands are tied.
“Interventions by the state, once in place in the form of regulation, limit the role that the Competition Commission can play,” said Ntuli.
Grant says he can’t believe other petrol stations have not discounted their diesel. “People are so used to just filling up, it’s sad that the consumer does not know that they are entitled to a cheaper price.”
Diesel customers at Grant’s Twin Palms petrol station have two options. They can purchase diesel at a discounted pump price of R5,50 per litre at a saving of 27c or they can sign up as a member of Club Diesel for a year and get a guaranteed discount of 30c a litre. “It’s just economic value; other’s don’t do it, so I do, that’s my advantage,” says Grant.
“By my discounting and registering people for Club Diesel, I have improved my litres sold per month from 180 000 to 400 000 litres,” says Grant. “We have more regular customers now that we have fixed our discount.”
Grant says that the fuel market is saturated with far too many petrol stations. “The pressure they [fuel majors] create through overtrading the market is probably one of the reasons that retailers are not discounting.”
Grant said the fuel majors are taking business away from petrol stations by installing pumps in the yards of companies that have large fleets and selling fuel to them at a cheaper price than the retailers can offer.
“A local company with eight small trucks has been taken over by one of the majors. He used to fill up here but not any more,” says Grant.
“We should be able to offer the best price. If businesses want tanks then they should pay a higher price. We could employ another 10 guys if we had the commercial market.”
South African Petroleum Industry Association’s (Sapia) Colin McClelland says that diesel is deregulated and if service stations want to compete with the majors for commercial business they must lower their margins.
McClelland says that Sapia supports the deregulation of retail pump prices as part a complete deregulation of the fuel market.
Forecourt views
Shabir Majam, who runs a Caltex garage on Jan Smuts Avenue in Rosebank, says he would discount his petrol prices if government regulation was done away with. “It creates competition and whoever has the better price will get more of the customers.”
Tony Purchase, who runs a BP station on Jan Smuts Avenue in Craighall Park, says that deregulation would change the whole face of the industry.
“You would see fewer petrol stations selling large volumes and that would result in huge losses in employment numbers,” says Purchase. “It will make it cheaper for the customer in the long run,” says Purchase, adding, “But I could not afford to discount my petrol.”
Bobby Bahadar, who runs an Engen station on Barry Hertzog Avenue, says deregulation would result in self-service petrol stations. He says that if petrol was deregulated he would not discount his petrol prices. “I would rather get together with competitors and regulate a price for the area.”
Justin Clarkson, who runs a Shell garage in Parkhurst, says his diesel price is dependent on the area as he can afford to charge more than he could in Mogale City.
Alexander Wilkox, who runs another Shell station in Parkhurst, says he keeps his diesel price in line with his surrounding competitors. “If I drop my price too low they will come down on me like a ton of bricks. I am a little guy and they would be able to sustain the low prices for a lot longer than me and would put me out of business.”