Petrol lobbyists warn of bloodbath
August 19, 2003
 By Lynda Loxton
Cape Town - Parliament yesterday was warned of a bloodbath in the already overtraded petrol station market if the new retail licensing system envisaged in the Petroleum Products Amendment Bill was not handled carefully.
The entry of Sasol and PetroSA into the retail market could only aggravate a desperate situation, the portfolio committee on minerals and energy was told during the last day of public hearings on the bill .
The firms would enter the market once they ended their agreements with the major oil companies to uplift their synthetic fuel and started marketing under their own brands.
The warning came from the African Minerals and Energy Forum (Amef), the Fuel Retailers' Association and the SA Fuel Dealers' Association, but they were divided on the best way forward.
While the Amef said new retail licences should only go to black operators, the other groups said all contracts between petrol stations and major oil firms should be reviewed.
This would make way for Sasol and PetroSA to sell through existing petrol stations and for petrol station operators to negotiate better deals with suppliers.
The SA Coastal Crude Refineries Association, however, was against the bill's apparent preference for Sasol and PetroSA when it came to retail licences because they produced 40 percent of the fuel used in the country.
The association represents BP, Caltex, Engen and Shell, which are opposed to a clause in the bill saying licences could be linked to the amount of fuel made in a given area.
But they all agreed the petrol station market was chronically overtraded with, for example, over 60 stations within a 5km radius in Johannesburg while they were scarce in less lucrative rural areas.
But even in the urban areas, overtrading had squeezed margins for petrol station operators, forcing many to close.
Increasing competition through the new licensing system to accommodate new entrants could result in a bloodbath with many, mostly black, operators going to the wall, the committee was told.
The retailers claimed the market was overtraded because the current system of granting margin increases to refineries was partly based on their investment in new petrol stations.
Oil companies could own petrol stations even though they could not operate them, and the more they had, the greater their market penetration. It had been estimated that 45 percent of petrol stations were owned by the oil companies.
The solution would be to halt the building of new stations and review existing contracts, allowing Sasol and PetroSA to enter the retail market without adding to the overtrading, the retailers said.
The Amef was concerned that the bill was silent on one-man businesses that bought diesel from wholesalers and resold it in bulk to road hauliers, while the retail associations slated the introduction of diesel credit cards that effectively cut margins further.
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