Warning to petrol stations in South Africa

The Competition Commission has issued a new warning to petrol stations and other businesses trying to capitalize on the recent fuel price hikes.

This is according to the commission’s chief economist, James Hodge, who stated that investigations will be launched against any forecourts attempting to exploit customers by significantly raising prices.

Speaking to HOT 102.7FM, Hodge said that filling stations, transport operators, suppliers, and other businesses must not use the ongoing fuel crisis as a smokescreen to cover up exploitative price increases.

He added that the commission is on the lookout for businesses attempting to price gouge customers.

Hodge explained that price gouging is opportunistic and exploitative behaviour in unusual economic circumstances where companies take advantage of supply disruptions or major cost shocks to rake in massive profits.

This concern is not just limited to motorists paying more at the pumps, as high fuel costs have a knock-on effect for the economy as a whole.

“Consumers and even other businesses will be expecting some price increases, obviously at the pump, but also beyond that,” he said.

Higher fuel prices impact nearly every level of the economy, from the agricultural sector to transport costs for other goods and services.

The uncertainty around the war in the Middle East and its impact on global oil prices means that motorists are expecting higher prices, but aren’t aware of what a reasonable hike looks like.

The Competition Commission is particularly concerned about two forms of price gouging.

The first is known as “jumping the gun,” where businesses raise prices before the cost of the good has actually gone up.

“You’re sitting with stocks at the old price, which you could sell at the old price, but you choose to sell at the new price,” he said.

This has already happened in South Africa, as certain forecourts around the country raised diesel prices before the official fuel price adjustments, which always take effect on the first Wednesday of each month.

Diesel, unlike petrol, is unregulated, which means that prices can vary between stations, but this practice is still condemned by the commission.

The second form of price gouging is when businesses raise prices by far more than the actual cost increase.

For example, if the wholesale price of diesel rises by R5 per litre but a station tries to raise prices by R10 or more per litre, this would be considered price gouging, as the increase goes well beyond market conditions.

Prices must come down once the crisis is over

The Competition Commission has also warned petrol stations to lower prices once the current fuel crisis subsides.

Hodge said that this is a major issue, as businesses are always quick to raise prices but are much more sluggish to lower them again once the market stabilizes.

The Competition Commission has flagged this behaviour in multiple cost-of-living reports, describing it as a “rocket and feather” trend.

Hodge explained that the commission has the power to investigate price-gouging practices by examining a company’s cost structures and profit margins before and after the fuel price increases.

“If they haven’t changed, we’ll move on, but if they have increased substantially, then we’re interested in why.”

Motorists and businesses are urged to report suspicious price hikes to the Competition Commission.

Hodge added that public complaints are often the first source the commission hears from, alerting them to exploitation in the value chain.

These comments follow a similar warning from  the Minister of Mineral and Petroleum Resources, Gwede Mantashe.

At the end of March, Mantashe warned petrol station owners that withholding fuel to sell it at raised prices the following month is illegal and that those found guilty of this practice will be prosecuted.

The minister’s comments were partly in response to growing concerns about diesel shortages in parts of the country.

The department has assured motorists multiple times that South Africa’s fuel supplies are secure, and that any shortages at petrol stations are likely the result of panic buying or owners withholding fuel to sell at a later date.

Mantashe said that his department will investigate whether the availability of diesel ‘conveniently’ goes up again once the higher fuel price is made official.