Load shedding, water shedding and now fuel shedding looms

Forget load and water restrictions, South Africa is spiralling towards potential fuel shedding due to a lack of strategic fuel reserves and refineries.

The Liquid Fuels Wholesalers Association has warned that South Africa currently does not have strategic stocks in refineries as most of them are not operational.

Import terminals

Speaking to The Citizen, CEO of the Liquid Fuels Wholesalers Association, Peter Morgan said most of the refineries have also become what he called “import terminals”.

“The risk to importing finished products is far greater that the risk of importing crude oil. So, because we have so much finished products being imported now, we don’t have any strategic stocks of finished product in the country which is very, very dangerous.

“We know that when you import finished product like the oil companies do, they import just in time and they only import for what they need now. In other words, there is no extra fuel in our country at the moment,” said Morgan.  

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Refinery shortage

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 there must be an agreement between the oil companies and government because there is a price to holding strategic stock.

“Every time the oil companies know that there is going to be a problem with a vessel because the shipping is late, the product is off-spec when we get it here and they test it, whether the ship gets here on time and it can’t get into the ports because there’s bad weather, immediately what happens is that they ration independent wholesalers.”

Should South Africans be worried?

“We don’t want to scare people so they start panic buying because that makes the problem worse than it really is. But at the same time, we have no strategic stocks when we also have pricing methodology that really don’t reflect what’s happening on the ground and we need those addressed at the same time.

“If you put the two together, we are very concerned that we can’t guarantee the security of supply and we are only talking about the non-urban areas. The oil companies trade in the urban areas and they are fine,” said Morgan.

Fuel price hike?

Morgan said fuel shedding is unlikely to drive up the petrol price.

“What it really means is that we are likely to have a situation in the non-urban areas where we are going to have to say to our customers ‘sorry guys, but we haven’t got product for a couple of days’.

“Unless we sort out the pricing methodology, we will have to start passing the initial cost that we are not recovering onto our customers,” said Morgan.

Strong leadership

He added that 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.

Morgan said there must be strong leadership that understands the strategic stocks and pricing methodology issues and provide solutions to the problems.

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