/ 13 June 2008

Eskom behind ‘diesel use soaring’

Diesel use in South Africa, driven by home generators and the trucking of coal to Eskom power stations

South African motorists are trimming their petrol use — sales are up by a mere 1,1% over the past two years, but diesel use, driven by home generators and the trucking of coal to Eskom power stations, has rocketed by 11% over the same period.

Meanwhile, petrol prices have risen by 40% in the past year and diesel by 70%.

Mike Schussler, chief economist at T-Sec, said the main reason for the increase in diesel is because coal is transported to Eskom by truck.

“From March last year there was in increase of 8% in road hauling sales. We suspect this is because of the transportation of coal. Electrical generators and Eskom’s gas turbines also work with diesel.”

Schussler says new oil refineries being built internationally will result in a decrease in the oil price in a year to 18 months, but the picture looks bleaker for diesel production.

“There is a worldwide diesel shortage because of the lack of diesel refineries. Environmental laws make it difficult to build oil refineries. At this stage there is a $31 price difference between a barrels of diesel compared with oil.

“I have never in my life seen what we are seeing now with percentage changes in the oil price literally happening over night. There will probably only be a switch to an alternative energy source for cars in the next decade.”

Oil was trading at $136 this week. Another 60c petrol increase is expected at the beginning of July.

“South Africa will definitely reap the benefit of the crisis in the automobile industry in future,” said Brand Pretorius, one of the leading car retailers in South Africa and chief executive of McCarthy Motor.

Pretorius believes that the development of vehicles that run on alternate energy sources is on the cards for the country.

“We have access to all the international technology through the local entities of international companies such as BMW South Africa and Volkswagen South Africa, which are German companies.”

At this stage hybrid cars are not a viable solution for South Africa because they are too costly.

“Only a few people are able to afford the Toyota Prius hybrid, the only hybrid car available in South Africa. People have to look at short- term solutions such as lift clubs and making use of public transport to relieve the burden of high fuel costs.”

Although the motor industry has seen a 28% dip in car sales in general over the past year, economists note that the sale of smaller more fuel-efficient cars has remained higher than other vehicles.