Gasoline prices are going to be deregulated, will we soon see cheaper fuel?

The South African government has officially started the process of deregulating the price of gasoline, which could finally open the doors to a possible drop in fuel prices.

Mineral Resources and Energy Minister Gwede Mantashe asked for comment on his “plan to introduce a price cap” for 93 octane in the weekly Government Gazette on Friday.

On the next page of the gazette, it says the public will have 30 days to comment on the notice before the process can move forward.

What’s interesting to note, however, is that Mantashe signed the notice on June 30, meaning he “has been sitting on the notice for three weeks,” as Business Insider reported.

The fuel price cap will have a significant impact on South African consumers. Gasoline retailers will have the freedom to discount fuel with special prices, bundles or volume discounts, creating a competitive space in the market.

The price of gasoline is currently controlled by the government, making it illegal to sell gasoline at any price other than that dictated by the government.

Mantashe is said to have contemplated this decision for much longer than since June 30. According to Finance Minister Enoch Godongwana, Mantashe had previously considered capping the price of petrol as part of a package of measures to be introduced after a prior temporary measure to reduce the price of petrol.

But Mantashe gave no details on the price cap, such as how it would be calculated, when it would be implemented or how it would be enforced.

The opposition Democratic Alliance has previously suggested deregulating fuel prices as a way to bring prices down. In a proposal to lower fuel prices to R17.50, the DA suggested that by introducing a new Fuel Deregulation Bill, competition in the fuel sector could be allowed. If the Fuel Deregulation Bill is passed, the market will take control of prices, allowing people to import cheaper fuel, wholesalers to distribute cheaper fuel, and retailers to compete on the basis of prices.

But the retail industry warns that calls for fuel price deregulation are “ignorant” and will in fact negatively impact fuel retailers.

As Fin24 reported, Fuel Retailers Association CEO Reggie Sibiya said that if fuel retailers squeeze their margins by competing with each other, they won’t survive.

“People who call for deregulation are ignorant. They think the retail margin is important to share. There is nothing to share. In fact, we need more to support our businesses,” Sibiya said.

He believes that “deregulation cannot occur before the transformation of the sector, because the reduction in margins will hurt new entrants who are very equipped and who are already struggling to make ends meet”.

“Pricing has everything to do with transformation, because the fuels business is all about margins and volumes. If you bring in new entrants and squeeze margins, you actually frustrate processing,” Sibiya said.

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