Competition in fuel market mooted
Maximum tariff for 93 octane would provide relief to squeezed consumers and shift drivers away from 95
The government is hoping a plan to allow some competition into setting the price of 93 octane fuel will result in lower prices and shift higher numbers of consumers into using it rather than higheroctane 95.
The government is hoping a plan to allow some competition into setting the price of 93 octane fuel will result in lower prices and shift higher numbers of consumers into using it rather than higher-octane 95.
The proposal has been circulated to the fuel wholesale and retail industries, which have been asked to comment on it by Wednesday.
It is tentative at this point and best described as a “market sounding” exercise, said government officials.
The move comes as the country faces record high fuel prices due to a rising oil price and weak rand, with the price of 95 octane in Gauteng at R17.08 and 93 at R16.85. With the exception of diesel, fuel prices are regulated at the pump and adjusted each month.
But political pressure has been mounting on the government to provide some relief as only about half of the price is comprised of the basic fuel cost and the rest is made of levies and other charges.
Deputy director-general in the department of energy Tseliso Maqubela said the suggestion was that when announcing the monthly fuel price, the government would set a maximum price for 93, above which retailers could not go. The price for 95 octane would remain at a mandatory level.
“The price that we publish every month for 93 will not be a set price but a capped price. What we think will happen is that wholesalers will discount 93, which will allow retailers to afford to pass this on to consumers,” he said.
Petrol in 93 octane requires less refining than 95 and is cheaper to refine.
But only 20% of drivers on SA roads use 93 octane, in the belief that 95 provides better performance. As 95 has higher octanes, it is less likely to preignite and damage engines.
Maqubela said while this was true for coastal areas it was not true for the higher altitudes in inland provinces.
According to manufacturer specifications, about half the cars on the country’s roads are able to use 93.
Maqubela said a greater number of users of 93 would promote more refining of the product, and this would hopefully bring down the price.
Additionally, the importation of the various components that are used to enhance octane would no longer be needed, which would improve the country’s trade balance.
Industry players said they could not comment on the proposal until they had consulted with their members.
The Automobile Association said it was in favour of exploring any option that could lower prices for consumers.
THE PRICE THAT WE PUBLISH EVERY MONTH FOR 93 WILL NOT BE A SET PRICE BUT A CAPPED PRICE