Fuel price tampering is a risky road to take

Arevelation by an official in the department of energy about September’s fuel price reprieve may debunk rumours that there was political pressure behind the intervention. Then again, it’s hard to believe that technocrats would play with the stability of an industry.

Robert Maake, who heads the fuel pricing division at the department of energy, dismissed the notion of political influence behind energy minister Jeff Radebe’s reprieve on the fuel price last month. He said it was technical staff who proposed the intervention to Radebe following a public outcry about the price hikes, which have been on a steep upward trajectory since April.

In September, Radebe suppressed a fuel price hike, much to the surprise and relief of motorists.

The fuel industry reluctantly acceded to the move aimed at insulating consumers — albeit for a month only — from yet another increase in petrol and diesel. But the industry extracted a promise from Radebe to not repeat the intervention, given its disruption to the fuel pricing framework, which is already complex.

Radebe’s action caused some policy uncertainty, according to industry insiders, and some suspicion about his motives.

Whether or not Radebe was acting under political pressure to improve the ANC’s image ahead of next year’s elections is unclear.

What is equally unclear is how the state may satisfy a demand for another possible intervention in the future, given that the oil price is forecast to rise to as much as $100 (R1,467) a barrel by the end of this year.

The decision not to hike the fuel price in September by 30c and instead to increase it by only 5c had unintended consequences that left some in the industry out of pocket.

The LPG gas industry, for example, is excluded from the slate levy fund from which many fuel providers can claim their costs in the event of an under-recovery.

Gas producers had to carry the cost when LPG gas was not hiked in September in line with rising oil prices.

How such a consequence was overlooked by supposedly competent technical staff is baffling, especially as the intervention was so temporary, and consumers this week had to stomach another hike, to a record fuel price.

The government need only look at Brazil to understand the implications of opening the door to populist decisions in the fuel industry.

After a truckers’ strike over higher fuel prices nearly crippled Brazil’s economy this year, the government succumbed, cutting more than 1-billion real (R3.76bn) on social programmes, infrastructure, export incentives and even highway maintenance to afford truckers’ demands for fuel prices to be cut.

As much as all commuters want lower fuel prices, in SA the government must carefully consider its moves because rash decisions, no matter how popular with voters, could destabilise critical industries and have a severe impact on the economy.

Rash decisions, no matter how popular, could destabilise critical industries