Fuel retailers debunk price hike perceptions
DURBAN - WITH fuel prices set to increase next month, the Fuel Retailers Association of Southern Africa (FRA) debunked the public perception that their members benefitted from the hike, but instead said it led to consumers trying to reduce their fuel consumption, spending less at the pump, which knocked retailers’ profits.
FRA chief executive Reggie Sibiya said on Tuesday that fuel retailers had no control on these regulated fuel prices and also became victims to what he called the ever increasing fuel prices.
“Coupled with this is the reality that when fuel prices go up, consumers tend to spend less on fuel thus contributing to reduced service stations volumes, which becomes another contributing factor to lesser profits,” said Sibiya.
The FRA said their members were still in survival mode due to Covid-19 and the state of the economy.
Fuel prices looked set for a hike of almost R1.00 and above in the first week of April 2021, according to the organisation’s latest estimates. It also said that inflation-related increases of 15c a litre and 11c a litre would be implemented for the general fuel levy and the RAF levy, respectively, with effect from April 7.
Sibiya said the Fuel Retail Margin was only adjusted once a year in December and retailers did not benefit from such fuel price increases throughout the year.
“The other increase is around September for petrol attendants wages in line with the Motor Industry Bargaining Council Wage Agreement,” said Sibiya.
The association, which represents fuel-station owners, said since the retail margin was fixed cents per litre throughout the year and most transactional costs were linked as a percentage of pump prices, the costs of retailing also rose when pump prices increased.
This then took away from the annually allocated fixed cents per litre in the retail margin, reducing the profits to retailers further, it said. The cost of required working capital also increased with a hike in wholesale fuel prices.
The FRA said the other costs related to April price adjustments, over and above the fuel levies, were transportation costs, which were also reviewed and implemented in April of each year.
Sibiya said these costs covered the transportation of fuel via the pipeline, via the road from coastal to Inland areas and from Inland to various inland depots.
“The cost is reflected as the zonal price differential on the fuel price structure. The current price build up contains different zonal prices depending on how far the zones are from the coast and also from the pipeline to a specific zone or area depots,” he said.
The FRA said while the fuel levies and basic fuel price increases were the same for all areas, it was the zonal price differentials that created different fuel price increases between different areas leading to some areas, such as coastal, having a lower or a higher fuel price increase than the one announced via Department of Mineral Resources and Energy (DMRE) media statement for Gauteng.
Sibiya said that last year primary transportation costs were increased by an average of 7.6 percent for road transportation and 11.6 percent for National Energy Regulator of South Africa’s pipeline tariffs. The hike in primary transport costs would differ in the 54 fuel pricing zones due to different transport cost increases applied in the 54 pricing zones, he said.