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Hike in Diesel Again - Clients must share burden

The wholesale price of diesel once again went up this month - this time by 15c. The retail price of petrol (all grades) has been hiked by 6c while the wholesale price of illuminating paraffin is up by 14c. The wholesale price of diesel but not the retail price is regulated. These hikes are beyond the control of transporters who can only carry these increases for so long before service levels start to suffer. Clients need to share some of the burden writes Patrick O'Leary. As an aid for transporters to educate their clients, FleetWatch is publishing the full text - including charts and figures - of the latest monthly statement issued by the Department of Minerals and Energy. It's little consolation for the hard-hit trucking industry but it explains some of the influencing factors that go towards making up the fuel price.

The way things are going with the price of diesel, it's getting really scary out there for transport operators. One transporter recently told FleetWatch that diesel and toll fees now constitute around 45% of costs on the Johannesburg/Durban run. Toll fees and the diesel price are totally out of the hands of transport operators. They have to accept what comes their way on these two cost inputs.

Apart from driving alternative routes to avoid paying toll fees (which is a far from ideal scenario as evidenced by the article headed 'Chaos on the R103' in our August edition) and/or implementing methods of improving fuel consumption and eliminating fuel fraud, that's it. They must pay. And they can't pass the diesel increases onto clients every month unless a specific adjustment clause is written into the contract - and I don't believe there are many those contracts around.

Of particular interest in the accompanying information will be the chart on the history of price changes for the period January 6, 1999 up to this month. Also of interest will be the chart detailing the composition of fuel prices in Gauteng for the period 6/9/2000 to 4/10/2000. Take a look at how petrol and diesel is taxed as revenue earners and compare that with the tax on paraffin. Note that all diesel users are paying an IP Marker Levy in the price of diesel to enable the detection of mixing paraffin with diesel.

We encourage operators to use the charts to show clients what you are facing as a transporter. These increases are beyond your control and it is unfair of any client to expect you to carry the burden. The point is, even if you are willing to do so, you can only carry the increased costs for so long before your service levels suffer - and that's when your clients are going to suffer. You need to pass some of the costs on and clients need to understand this.

Don't be a martyr. Take this information to your clients and show them what you are facing. And if these pages help you in getting your clients to share some of the cost burden, please let us know. Also, if you go through all this and have any queries or want further explanations, phone Dr R Crompton, Department of Minerals and Energy on tel (012) 317-9005; or Mr H Baak, Department of Minerals and Energy on tel (012) 317-9221. Here is the statement in its entirety as received by FleetWatch.

Economic factors affecting the under-recoveries for the period 26 July 2000 to 25 August 2000

During the period under review, the average international prices of Petrol, Diesel and Illuminating Paraffin increased. The average Rand/US Dollar exchange rate weakened slightly when compared to the previous period. The average Rand/ US Dollar exchange rate for the period 26 July 2000 to 25 August 2000 is 6,9530 compared to 6,8536 during the previous period.

Price Adjustment

In terms of the agreed mechanism:

• (a) Price changes are adjusted in such a manner that the over- or under-recovery during the previous month will be corrected in the following month; and
  
  
• (b) The unit over- or under-recoveries are rounded up or down to the nearest full cent so that the effect of rounding contributes to the clearing of the cumulative balance of the individual products on the slate.With effect from 3 March 1999, an additional mechanism has been approved by the Minister of Minerals and Energy intended to assist in management of cumulative slate balances and which operates as follows: Should the cumulative individual slate balances (positive or negative) exceed R10 million for petrols, R5 million for diesel, or R1 million for illuminating paraffin, an additional 1,0 cent per litre will be added or subtracted to the price (as determined in (a) and (b) above), depending on the status of the individual slate balances.

Report of the Independent Auditors

The application of the mechanism to determine the price adjustments was checked on a test basis by Grant Thornton Kessel Feinstein and they reported that no errors were detected based on their procedures. The annexure does not form part of their report.