There is no certainty that if South Africa’s petrol price is deregulated that it will stay down, a senior official of the Department of Minerals and Energy Affairs told MPs on Wednesday.
Addressing the National Assembly minerals and energy committee, the chief director of hydrocarbons, Nhlanhla Gumede, asked the question whether, indeed, the consequence of deregulation would be that the price would go up.
Noting that South Africa was a small player in the market — and dependent largely on imports of fuel — he said his department had looked at other countries that deregulated their fuel.
“Initially the price went down, yes, but unfortunately the price crept up again. It is something we need to further study … that is our concern, once we have let this out of the cage [we] will not be able to put it back again.”
He noted that Sasol — the South African synthetic fuels producer — tends to price its non-regulated products at similar prices as its competitors.
Gumede noted that liquid petroleum gas is produced in South Africa at under just over R4 per kilogram yet it sells at “over R16”. All the prices of non-regulated fuel products tend to be set at import parity price, he argued.
The minute the local price of a fuel is lower than elsewhere, producers tend to export their product.
Gumede also argued that when the local price is lower and imports are required, it will be near impossible to garner supply from outside. This Zambia discovered recently when its oil refinery was out of action.
He said the option also had been proposed that South Africa should subsidise fuel, but he said that nations like Saudi Arabia and Venezuela could do so because they were large oil producers. — I-Net Bridge