‘Fuel-shedding’ warning sounded

South Africa is heading towards potential “fuel-shedding” due to a lack of strategic fuel reserves and refineries.

This is the warning from Peter Morgan, CEO of the Liquified Fuels Wholesalers Association. 

“You must have strategic stocks in refineries. At the moment we don’t have enough. Most of our refineries are not operational, including the Engen Durban refinery and PetroSA’s refinery in Mossel Bay,” said Morgan. 

“If you have refineries you avert a lot of problems. If there’s a shortage of fuel to put into the market, you can take from the refineries without the customer realising. Then you replace that product once there is flow.”

He said while there is a cost to carrying a strategic refinery, there are many challenges that can affect the supply chain if the country is without one.

The shortage of refineries means the country is increasingly reliant on imports, and supply line disruptions are a risk, as highlighted by the recent Transnet strike that affected operations at the Durban port.

Morgan said it was commendable that Transnet regained control in time and avoided a situation where fuel was a scarce resource. He said wholesalers are often rationed.

“The oil majors operate in urban areas, while independent wholesalers operate in the non-urban areas. This means the security of supply to non-urban areas is of concern.

“The cost of transporting the product has become expensive. This is also because of the skyrocketing price of diesel. This forces the wholesaler to shift the cost to a retailer who then dumps it on the consumer.

“We have to go back to the drawing board, preferably within 30 days to avoid us reaching crisis levels. Market forces will determine what we do next. Many wholesalers are operating on bankruptcy,” said Morgan.

In 2006, then minister of minerals and energy Buyelwa Sonjica appointed an 11-member panel headed by advocate Marumo Moerane to review the circumstances that resulted in fuel supply shortages in November/December 2005.

The report recommended a comprehensive review of the petroleum pricing regime to address matters relating to the zone differential to remove inefficiencies and indirect transport subsidies.

The Moerane report also recommended the basis of setting the basic fuel price should be revisited, given the lack of clarity with regard to who has the obligation to hold stocks.

The DA said it will be submitting an urgent question to energy minister Gwede Mantashe to inform the country about the status of fuel reserves.

‘We will further seek to ensure he provides us with any documentation detailing action plans taken by the department since 2006 to effect the implementation of the strategic refined fuel reserve recommendation by the Moerane commission.”

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