Diesel sees another hike while petrol users gain some relief

‘Because the gap left by Russia has not been filled yet…the diesel price is not improving at all, so we can expect that it might increase again next month’: Robert Maake — DMRE.

FIFI PETERS: At midnight those who drive petrol cars received some relief, just a small relief but relief nonetheless, given the fact that the price at the pumps fell a bit – by 12 cents a litre. Of course we know that this was helped by the slightly lower international oil price in the month, as well as the temporary relief that government gave us all in cutting the general fuel levy by R1.50/litre last month. That also extends to this month.

But the story for motorists who are driving diesel vehicles is completely different, because the price of diesel went up, and it went up by quite a lot, almost R1/litre, depending on which grade that you use. So we’re going to have a one-on-one and a ‘101 understanding’ of the makeup of the diesel price or what determines it, and what we should be expecting in terms of the direction for diesel prices in future.

Robert Maake, the director, Fuel Pricing Mechanism at the DMRE, joins us for more. Robert, thanks so much for your time. It was a pretty steep increase in diesel. I met a friend of mine who is a tourist operator and drives a diesel van, and he spoke about the fact that it’s very expensive for him right now. Just help us understand how the diesel price is a calculated.

ROBERT MAAKE: Good evening, Fifi, good evening to the listeners, and thank you for the opportunity. Indeed, the diesel price went up by close to R1 in Gauteng. The main reason for that is because there’s a shortage of diesel in the market at the moment. Russia is one of the biggest producers of diesel fuel and so on. So, because of the sanctions that diesel is stranded now, Russia cannot go into the market and the market is struggling to replace the supply of diesel from Russia. That’s why you see the price of diesel going up while the petrol price seems to be going down.

Also, to emphasise that, the price decrease is only in Gauteng. In the different zones, because of Zone 54, the decrease is different. For example, in Letaba, in Tzaneen, the price dropped by 22 cents, mainly because the road transport cost also dropped during this adjustment. We adjust generally in April.

FIFI PETERS: Thanks for providing that clarity. But, circling back to the diesel market and, as you have explained, the sanctions on Russia, [and] a shortage in the market, the issue is that that problem and the war and the tensions in Russia are still ongoing. So how long is this likely to be a problem for the diesel market in your view?

ROBERT MAAKE: Well, it’s difficult to say how long it will take, but what we know is that the market is trying to correct that shortage. Other suppliers are trying to fill the gap left by Russia. It takes a bit of time. Normally it takes three to four months to actually fill that gap but, because of the ongoing sanctions and so on, it’s difficult to say how long it’ll take. But we expect the market to correct itself.

FIFI PETERS: All right. So you’re saying that the other suppliers that are trying to plug the gap have enough to do so?

ROBERT MAAKE: Well, that’s the problem, because some of them don’t have enough; they need to ramp up their production at the refinery level so that they can actually produce more than they were producing. That’s why it can take a bit of time before that diesel can reach the market.

FIFI PETERS: In terms of the outlook for the a diesel pricing, can I interpret what you are saying as meaning that diesel motorists should expect to continue paying a lot more to fill up their cars for the foreseeable future?

ROBERT MAAKE: Well, I could say now, given what is happening currently because the gap left by Russia has not been filled yet, there is still that shortage in the market.

We are seeing that the diesel price is not improving at all, so we can expect that it might increase again next month.

FIFI PETERS: Are there conversations about perhaps providing the same form of relief that we got in the general fuel levy and extending that to the diesel market?

ROBERT MAAKE: The only thing I know is that the relief was for two months. Besides, what the two ministers are now [implementing], we haven’t heard anything yet.

FIFI PETERS: I’m sure you would’ve seen the headlines coming out of Russia and the European Union today regarding the fact that the European Union was looking at banning Russian oil, and we saw the impact that this has had on the oil price in today’s session. I’m just wondering what you make of those developments and what that could mean now – not only for diesel but also for petrol.

ROBERT MAAKE: For the oil price it’s slightly different … because the Organisation of Petroleum Exporting Countries (Opec) – that’s the main producers of oil. So they can always during their meeting agree to actually increase production of oil, which then can stabilise the oil price. The only challenge we have at the moment, as we rightfully said, is the availability of diesel in the market because most of the diesel was coming from Russia. Now somebody has to fill that gap left by Russia.

Remember the Organisation of Petroleum Exporting Countries, are mostly the oil producers – they don’t produce finished product. They produce oil; so countries that can refine the oil and then produce finished product are then the ones that will produce the required product, depending on their refineries and so on. That’s why the market is trying to do, and see how they can correct the shortage of diesel.

FIFI PETERS: So, as a country, as South Africa, who else are we talking to for the time being, just to try and ensure that we’re able to at least fill this supply gap that we have as a result of the sanctions in Russia. Can you tell us which countries we’re talking to?

ROBERT MAAKE: Yes, well, remember government does not import the finished product. It’s the oil companies that are doing that. So, through our fuel-supply meeting with the oil companies and everybody that is operating in the country, we are talking in terms of making sure that there is security of supply in the country. So the oil companies in the main are the ones that are sourcing diesel from other suppliers.

FIFI PETERS: Robert, what then is your advice to motorists under this current climate?

ROBERT MAAKE: Under this climate my advice to motorists will be to follow the fuel-saving tips and try to save as much fuel as you can. Don’t drive around if you don’t have trips that you really need to go to. Make sure that the air in your tyres is at the normal required air pressure, and use lift clubs where possible. Where public transport is reliable, use public transport so that you can save as much fuel as possible until the situation is stabilised.

FIFI PETERS: It’s anyone’s guess at this stage when that will be.

Robert, thanks so much for your time. We’ll leave it there. Robert Maake is the director of the fuel-pricing mechanism at the Department of Mineral and Energy Resources.

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