File photo: Reuters

MPs yesterday got a lesson on how the basic fuel price is determined and how a legacy of the apartheid days is still affecting the price of petrol at local service station pumps.

Among the elements in the cost of the basic fuel price is the cost of transporting the fuel across the oceans. A 15 percent premium was placed on shipping fuel to South Africa during the apartheid days, which the country has lived with ever since.

The London Tanker Brokers’ Panel – an independent authority that provides a variety of rate assessments on a fee-paying basis for individual oil companies, traders, tanker operators and other interests worldwide – determines the freight element. The panel also publishes monthly average freight rate assessments.


Robert Maake, a chief director in the Energy Department, told MPs serving on the National Assembly’s energy portfolio committee: “It could have been out of the [anti-apartheid] embargo.” He pledged a review of this cost element to see if it was justified and whether it should be a part of the pricing system.

His colleague Muzi Mkhize agreed that “we need to get down to… the terms of the basic fuel price”. Pressed on whether the price would go down in the future, he said it was premature to say and he did not want to create any expectations.

According to the Energy Department, the basic fuel price is based on the import parity pricing principle – what it would cost a South African importer of petrol to buy the fuel from an international refinery.

The Central Energy Fund was appointed by the cabinet in 1994 “as an impartial body” – according to Mkhize – to determine basic fuel prices.

The elements of the basic fuel price include the freight and average freight rates, insurance, the ocean loss, demurrage, cargo duties, coastal storage and stock financing costs. The department explained that demurrage was “the time spent in a harbour to load and discharge a cargo”. -Business Report