Diesel Pricing in South Africa

  • 02 Julie 2020
  • 612

The most important fact to understand is that diesel is deregulated at the pump and at wholesale level.  This means that a refiner such as Engen or BP can sell diesel to a retailer like your local filling station or an end-user like a farmer or a mine at any price that the two parties agree on.  The retailer who owns the filling station can then determine the pump price from that point on.

A retailer typically considers a few factors before settling on price: 

  • The price of diesel at their closest opposition filling stations.
  • The margin per litre required to cover costs and make a profit (costs such as rent, utilities and labour differ from rural to metro areas).
  • Consistency of supply in the area. 
  • Credit extended to customers or extended payment terms.
  • Loyalty benefits offered by opposition.

The above factors also determine the propensity of customers to shift to opposition.

The Department of Energy releases fuel pricing which changes on the first Wednesday of every month and is determined largely by the Rand/Dollar exchange rate and the Brent oil price fluctuations within the previous month. It is important to note that the Pump prices for Petrol grades are fixed and would be the same at any filling station in the same town, whilst the prices published for Diesel are wholesale prices, not pump prices, as these are de-regulated. Paraffin and Gas (LPG) are partially regulated, meaning there is a maximum retail price which needs to be adhered to, but retailers may sell below this maximum price as they please.

The country is split up into different transport zones and the wholesale list price is often quoted as the “grid price” in a particular zone. Coastal zones usually have the lowest prices as they are close to refineries/ports and have not incurred much transport costs or pipeline levies to move the product inland.  The further the product is transported inland, the more expensive it becomes, hence the big price difference between fuel in Gauteng versus Durban for example.

Customers often do not understand why diesel prices in two neighbouring towns can differ, even under the same brand.  The reason could be a culmination of all the factors listed above, but also due to the two towns falling in different transport zones, hence the cost prices for diesel may differ.  

The quality, specifications and origin of the diesel also plays a role.  10ppm diesel is usually more expensive than 50ppm and fully additivised product would carry a slight premium over base diesel.  Unfortunately, as in any industry, we also have unscrupulous traders who mix the diesel with other products to lower the cost per litre. Therefore, it is crucial for a customer to ensure that the diesel is not only priced fairly, but is obtained from a reputable source, complies to the SANS 342:2016 specifications and ultimately has an additive package tailored for South African conditions.

We will cover the topics of sulphur content (50ppm vs 10ppm) and additive packages in upcoming 5 minute reads.

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