Here’s why you’re already paying R27 per litre for diesel in South Africa

South African motorists are preparing for a major fuel hike to take effect in April because of the conflict in the Middle East, but some retailers have jumped the gun, substantially increasing diesel prices ahead of the adjustment.

This is because diesel is unregulated in South Africa, something the CEO of the Automobile Association (AA) of South Africa, Bobby Ramagwede, questioned.

Speaking to Jacaranda FM about South Africa’s current fuel outlook, he noted that next month’s fuel outlook “should theoretically not be too bad”, as the country’s fuel reserves are secure.

Ramagwede has assured motorists that, despite the 2016 “SFF Oilgate” scandal, South Africa bought back its fuel reserves.

“Assuming we did not sell it afterwards, we have got reserves, and these reserves are meant for rainy days,” he explained.

Ramagwede said that the current situation constitutes tapping into these reserves to protect consumers from massive fuel price increases.

He noted that diesel price adjustments should not be as drastic as we are currently seeing, as these reserves were restored years ago, at much lower prices.

Regarding ongoing global shortages as a result of the closure of the Strait of Hormuz, Ramagwede noted that South Africa’s supply has not been cut off completely.

While much of our oil and petroleum product supply does have to travel through the Strait, South Africa gets much of its oil from Oman, which is unaffected by the closure, India, and Nigeria.

Ramagwede explained that what is going on locally is that retailers are hiking prices and hiding behind their brands.

He explained that many retailers are making opportunistic diesel price adjustments, with some resellers hiking diesel prices to R33 per litre.

Why diesel is unregulated in South Africa

Responding to a listener’s question, Ramagwede explained that this is only the case with diesel prices and that these prices differ from station to station because diesel is unregulated in South Africa.

“Of all the fuel that is consumed in South Africa, the vast majority of it is diesel. Diesel in industrial applications, diesel cars, diesel trains, diesel in trucks,” he noted.

“Yet, the one with the greatest variance is diesel, the one that gets the most manipulated is diesel, and as you can see right now, it’s all diesel.”

Ramagwede explained that the AA questions the government monthly about why it does not regulate diesel.

The Department of Mineral and Petroleum Resources (DMPR) only regulates wholesale diesel prices, allowing retailers to set their own prices based on market conditions.

This is done to foster competition, but the uncertainty and volatility that goes along with this are causing headaches for motorists.

Ramagwede explained that the government has all the power to soften the blow of draastic fuel price increases, especially considering that nearly half of the price per litre consists of levies and taxes.

These are also slated to increase alongside the expected price increases in April.

“With the stroke of a pen, the government can give the necessary reprieve, so that consumers don’t suffer,” Ramagwede declared.

“My plea to the government would be to just drop the levies. These are special times that call for special action.”

He noted that there is no real reason for fuel prices to increase next month if South Africa’s reserves were secured years ago.

Should the reserves run out – which is incredibly unlikely – and more expensive crude oil and petroleum products need to be purchased, price increases would be justified.