Government’s fuel policy makes us all poorer

Jack Lewis
Bus running on soybean biodiesel. U.S. Department of Energy: Energy Efficiency and Renewable Energy.
Jack Lewis

Expect another hike in the price of petrol, diesel and paraffin in October. This is because the price is staying above $110 a barrel and the rand is weakening.

This is an obvious disaster for South Africa. The high price of fuel drives up transport costs and therefore the cost of everything. It makes us all poorer. Business has to plan on a high fuel price in working out whether an investment is profitable – restricting investment and job creation. Worse, many businesses will buckle and close as a result. The poor will have less money for basics – food, transport and shelter. The tragedy is a result of government failure; we are failing to keep fuel prices low in South Africa. A low fuel price will attract investment, create jobs, protect living standards and keep inflation under control. Here is how.

  1. SASOL. Government remains a huge shareholder – holding 23% of SASOL shares. It should seek to increase its shareholding in SASOL so it can take control of the SASOL board. Why? So that the nearly 30% of SASOL oil from coal made locally at SASOL’s three plants is shared equally between all the refineries (Caltex, BP, Shell). Sasol’s oil from coal costs less than $40 dollars per barrel – including all costs. But it is sold in South Africa as if it has been imported from the Middle East – that is called import parity pricing. It is ridiculous. Just selling oil from coal at $40 a barrel in South Africa and blending it with the imported stuff at $110 barrel would stabilise the price.

  2. Over 50 per cent of the pump price we pay is made up of taxes. Government needs to review these taxes and find a means of spreading some of them over the whole of society and not just petrol users. It is an extremely regressive tax – taxing poor people who use taxies and buy maize and basic food stuffs. Reduce tax on fuel and shift the tax burden to the rich and the corporations.

  3. Urgently invest in offshore natural gas. Cars can be converted to run on natural gas which is plentiful along our shores and in the shores off Namibia and Mozambique. Natural gas can be converted to petrol as well – which is what SASOL’s Mossel Bay plant does.

  4. Re-visit biofuels. A few years back, huge capital was lined up to invest in biofuels. Government stopped it because of fears about the impact on the price of food maize. The truth is that this government, which so strongly believes in regulation, could have devised rules which would have seen a huge increase in maize for food as well as maize and sugar cane for bio-fuels. One example: let communities with underutilised land in the old homeland areas hire out huge tracts of underutilised land to large agricultural corporations. Rural incomes will radically increase through the rental income earned! It is insane that given that imported oil prices can only go up, nothing is being done to invest in bio-fuels.

There is so much that could be done to achieve a huge reduction in the current fuel price with the consequences of keeping inflation down, helping the poor and unemployed to maintain their food intake, and making South Africa attractive for investment. Our government has failed us in this as in so much else.

Lewis is co-director of Community Media Trust. He is also an economist and farmer.

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TOPICS:  Economy

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