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Fuel retailers threaten shutdown over petrol, diesel shortages

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Fuel retailers are now seriously considering the same actions taken by the taxi industry for both the government and the oil companies to start taking them seriously, says association.

File picture: Doctor Ngcobo / ANA

FUEL retailers are facing petrol and diesel shortages due to problems with the petroleum supply chain and have threatened to shut down service stations until their plea is taken seriously.

Fuel Retailers Association (FRA) chief executive Reggie Sibiya said that fuel shortages were being felt by “various oil companies and wholesalers” in the country. 

“Some retailers are struggling to get any supply from the refineries and distributors that were shut down during lockdown. At the start of the shortage some weeks back, it seemed like the problem would be mitigated in the short to medium term. However, it is continuing and has already resulted in severe consequences for some retailers,” Sibiya said.

“For the fuel retailers, this is a very thorny issue. They lost up to 80% volumes during the level 5 and 4 lockdown due to no product demand. To now not get product when the demand has slightly increased is an absolute mockery,” he said.

Sibiya said government needed to hold oil companies, which were members of the SA Petroleum Industry Association (Sapia), accountable as they had “got away with this for ages with no imminent recourse”.

He said fuel retailers were held in breach of contract when they ran out of fuel, but there was no recourse against oil companies for supply shortages because of “onerous and one-sided agreements”.

He said the Consumer Protection Act had failed franchisees in this regard.

He said various reasons had been proffered for the shortage but were difficult to pin down.

“It started off as closure of refineries due to Covid-19, to disruptions due to delays in ships arriving and vessels injecting product, and at some stage damage to pipelines due to theft of products, and the list goes on and on, as usual,” Sibiya said.

He added that most of the “challenges” had been at inland depots, and some oil companies had experienced more problems than others. He said there was “no sign of improvement” at some firms, including Shell.

“We are not aware of what the government is doing about it. We have reported these things in the past with no evidence of the government doing anything about it, and we have given up on that aspect.

“The government to date has not sufficiently addressed all the recommendations that came out of the Moerane Commission report in about 2005/206, especially in the area of sufficient storage capacity,” Sibiya said. 

The report also looked at the area of planned scheduling of refinery shutdowns.

“The Moerane Commission report should be revisited and evaluated in terms of progress against the findings, and this must be championed by the government. Our government could not even assist fuel retailers during hard times of 80% reduction in volumes, when our neighbouring countries like Namibia, who source the product from South Africa, were able to assist their fuel retailers with a 50cpl temporary Covid-19 margin relief,” Sibiya said.

He said retailers were already engaged in a court battle with the minister of minerals and energy regarding their profit margins.

“Fuel retailers are now seriously considering the same actions taken by the taxi industry for both the government and the oil companies to start taking them seriously. Fuel retailers are at the brunt of all sorts of criminal activity and other social issues while collecting the fuel tax for the government, which just does not seem to take them seriously.

“Their margins are way behind costs inflation,”

Sibiya said retailers would consider closing service stations until their plea was taken seriously.

Road Freight Association chief executive Gavin Kelly said inland depots were struggling with diesel shortages, although business was “ticking over” for truckers who had cut some operations.

“There were some shortages due to the refineries going off before lockdown so they could have maintenance done, but from what we understand, maintenance didn’t happen and they were still offline when demand for diesel started to climb,” Kelly said.

He said Transnet’s pipeline had also been breached in five locations and diesel had been stolen, which had affected the supply chain.

“There is restricted supply of diesel, but you will find diesel in the forecourts for average people. It’s the inland depots where most of the commercial operators draw their diesel that there isn’t diesel,” he said.

Kelly said some inland depots were rationing diesel to 200 to 300 litres.

“They need to prioritise the maintenance that has been delayed and get that done as soon as possible. The other thing is that the SAPS needs to guard the pipeline,” he said.

Sapia and several oil-producing companies that were approached for comment, including Engen and Sapref, had not responded to questions at the time of publication.

In a statement issued late on Monday night, the Department of Mineral Resources and Energy said in May it had announced that diesel was being rationed, “at least until when refineries that were closed in Level 5 of the nationwide lockdown start producing”. It said currently “we understand that there is sufficient petroleum products available for the South African market”.

“We are aware of logistical challenges experienced as a result of reported tampering with the pipeline network, either through attempted theft or actual theft of fuel. We welcome and support all efforts by the relevant organs that are aimed at curbing these challenges, which if left unattended, have a potential of delaying supply to wholesalers,” the statement read.

Meanwhile, the FRA and the Automobile Association said they expected a hike in the fuel price to be announced following the release of unaudited month-end fuel price data by the Central Energy Fund.

“In terms of the latest estimates, there are definitely going to be major price increases on both petrol and diesel,” Sibiya said.

The AA said climbing international crude oil prices have set the stage for “extraordinary fuel price hikes” despite the rand’s strength during June.

Shell spokesperson Dineo Pooe referred a request for comment to Sapia, saying “the questions on the diesel supply matter are industry-related and not Shell specific”.

“Regarding our joint venture refinery, Sapref – it closed down in April for a planned maintenance shutdown and resumed its normal operations on May 25,” Pooe said.