Govt to review fuel price hike

The Department of Energy would review the mechanism used to set SA’s fuel prices, it announced yesterday.

Although the department could not say how the review would affect prices, the decision came a day before the price of 95 octane and 93 octane petrol increased in the inland area by 71c/l and 73c/l respectively.

According to the department, the petrol price in SA is directly linked to the price of petrol quoted in dollars at refined petroleum export-orientated refineries in the Mediterranean Sea area and Singapore. International crude oil prices and the rand-dollar exchange rate are the other elements in setting the fuel price.

The basic fuels price mechanism has been in place since April 2003 and the review will be completed this year.

South African Petroleum Retailers Association director Peter Noke yesterday welcomed the review, but said it was difficult to pre-empt its outcome.

"It is difficult to make a call on whether it will lead to a decrease or an increase in prices," he said.

The review could determine if the different elements of the basic fuel price were still "relevant", he said.

The Department of Energy’s chief director for hydrocarbons, Muzi Mkhize, said at a press briefing yesterday there would be "proper" public consultation on the review.

Energy Minister Dipuo Peters told the briefing yesterday the department did not control fuel prices.

"As a non-oil-producing country, SA is a price taker and depends on imports. The market prices are set in accordance with developments beyond the control of the government of SA," Ms Peters said.

Meanwhile, the department’s director-general, Nelisiwe Magubane, said officials had been in negotiations with oil companies about the implementation of cleaner fuel standards, which the government wants to implement by 2017.

"We need to sort out the issue of costs. Who is going to carry the costs (associated with the conversion to cleaner fuels)?" Ms Magubane asked at the press briefing. The South African Petroleum Industry Association has said it would cost up to R40-billion to upgrade SA’s refineries.

"We want to know from each refinery how much it will cost them to produce cleaner fuels. We have spoken to a number of the companies," Ms Magubane said.

She would not say if the costs of the upgrades were far off from the association’s R40-billion estimate. She said the Department of Energy was now in discussions with the Treasury to consider funding options.

Ms Magubane also said the government would make a decision on PetroSA’s oil refinery project in Coega, near Port Elizabeth, later this year.

She said the project would be considered alongside Sasol ’s planned coal-to-liquids plants, known as Project Mafutha. The government would look at the costs and benefits of each of the projects.

"Project Mafutha is not completely off the table," Ms Magubane said.







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