Customers pay as diesel price climbs

Plenty of anomalies in fuel price ALAN PEAT THE ROAD haulage industry’s only answer to the record fuel prices is “customers pay” – not all the cost, but certainly an increasing amount as the diesel price climbs ever higher. “Because it constitutes about 20%-30% of our overall costs,” Garth Bolton, joint-CE of Cargo Carriers, told FTW, “we basically have a clause in our contracts to recoup some of this cost as fuel prices rise. “In this situation, we pass on the whole increase.” It’s not a new problem, the industry having done an intensive study of fuel pricing some time back. “In this,” Bolton added, “we found a lot of anomalies in the SA fuel price.” Although Sasol produces fuel from coal locally and makes about 40% of SA’s fuel needs, there is the problem of this country’s diesel and petrol prices being based on a theoretical import landed cost – with fuel priced against current costs in Bahrain and Singapore. “Also all the shipping costs – like wharfage – are included, although not actually incurred,” said Bolton. “Another price-inflating factor, is that all SA fuels and oils are assumed to be landed at the coast, and transported to the Reef – where Sasol is located. But its product price is still fixed as though it came from the coast.” Another hassle which the truckers’ fuel price investigation uncovered was that this import price parity enjoyed by Sasol also artificially inflates the supposed local production cost – with Bolton highlighting that the price of coal has not increased at the same high rate as oil has in recent times. However, the SA government – unlike many others around the world – has not added its own contribution, and not imposed heavy taxes to further bleed the fuel users’ wallets. “They have been quite good,” said Bolton, “in that taxes have only been increased marginally over the years – and probably at a rate below the inflation rate. “We are now paying tax of about R1.20 per litre compared to R1/l a couple of years back.” If government was to do anything about this price parity problem, it should look at Sasol, according to Bolton. “However,” he said, “if they were challenged, Sasol would probably say that they don’t need to sell fuel locally – but could sell at attractive prices to export markets. “They would also probably point out just how much foreign exchange they were saving.” But, as this has all been an ongoing problem for some years – and has yet remained unchanged – it looks as though there are no easy answers to SA’s fuel price crisis. This has left the trucking industry with little alternative but to recover some of its ever-increasing fuel costs from its customer base – and ultimately from the final consumers.