South Africa currently has 10 million barrels of crude oil in its strategic fuel reserve terminal, says Mineral Resources and Energy minister Gwede Mantashe.
Responding to a recent parliamentary Q&A sent by the opposition Democratic Alliance, Mantashe said that of this 10 million, only 8.7 million barrels are accounted for as inventory, with the balance considered ‘working stock’.
“The cost per barrel is as per prevailing market rate. Each grade of crude oil is priced differently at a premium or discount of brent crude oil as prevailing in the market. As of the 4th of April, brent crude oil was trading at $104/bbl. As of the 28th of March 2022, the cost value of the strategic reserves in the tank was R1,750,764,252.
“This is what would be reflected on the annual financial statement in terms of the accounting rules.”
Mantashe confirmed that the strategic stock will be utilised to provide R6 Billion in cover for revenue lost in the reduction of the general fuel levy for two months.
This will effectively reduce the general fuel levy for petrol from R3.85 per litre to R2.35 per litre and reduce the general fuel levy for diesel from R3.70 per litre to R2.20 per litre, he said.
South Africa’s strategic fuel serves have been a point of contention after the Strategic Fuel Fund (SFF) sold 10.3 million barrels of the country’s oil reserves for less than the going market rate in 2015.
By law, the SFF must hold sufficient oil reserves to last the country up to 21 days, which is an equivalent amount to what was sold. Former energy minister Tina Joemat-Pettersson infamously told parliament in 2016 that it was not a sale, but ‘a rotation’.
In March 2022, finance minister Enoch Godongwana said that using the country’s reserves would allow it to reduce the general fuel levy (GFL) included in the basic fuel price by R1.50/litre for the period between 6 April to 31 May 2022. A broad number of interventions will also be considered once the two-month period lapses, including a review of the basic fuel price, the minister said.
- A reduction in the Basic Fuel Price of 3c/l, in line with the recommendations of the review done by the Department of Mineral Resources and Energy (DMRE).
- The termination of the Demand Side Management Levy (DSML) of 10c/l on 95 unleaded petrol sold inland.
- The introduction of a price cap on 93 octane petrol, following from the previous DMRE proposal and consultation. This will allow retailers to sell at a price below the regulated price.
- The termination of the practice to publish guidance by the DMRE on diesel prices to promote greater competition.
- The Regulatory Accounting System (including the retail margin, wholesale margin and secondary storage and distribution margins) will be reviewed to assess whether adjustments can be made to lower the margins over the medium term. Interventions will be considered by the DMRE to reduce the price pressure for illuminating paraffin over the medium term.