“Equality of Misery”
The Liquid Fuels Industry has moved from an industry where 6 major Oil companies performed all the ring fenced activities ( resultant Oligopoly behaviour ) to one where there are many more players ( more than 2000 Wholesale licenses issued ), hence more competition and therefore should result in lesser barriers to entry, however the liquid fuels industry is increasingly competitive, with pricing mechanisms that do not reflect the change to the Liquid Fuels industry over the last 20 years and as such there is a concern that unless the following principal issues is addressed the sustainability of current independent wholesalers and any further new entrants is threatened.
The Oil majors and policy makers need to understand the simple realities.
The equality of misery that we refer to, is linking the unequal sharing of previous wealth with the misery that is being created during transformation of the liquid fuels industry.
The Liquid Fuels industry must be seen as a grudge purchase – not like the technology revolution that can claim “changing the world”.
Previously the Oil majors not only shared the infrastructure for importing, shared the pipelines, shared the profit / cost recovery mechanisms, they also shared the depot networks
During this time any supply interruptions were dealt with as a group – i.e. “product was shared” amongst refiners and these refiners (suppliers) and the market was oblivious to any challenges.
Since 1994 pressure on cost recoveries (margins) has created change in behaviour. This change in behaviour now rests on a premise that any internal supply challenges will be addressed by halting product supplies to Independent Wholesalers – as such their customers, to ensure self-compliance first.
This ignorance of the role that their own partners play in the sustainability of the South African economy (see independent Wholesalers) is not an ignorance of the fact but rather a keen understanding of the market power that refiners / importers have in the market and with no short or medium term policies of changing this, they will continue to make decisions based on the belief that independent wholesalers must simply endure.
Not even the supply disruptions in December 2005 (see Moerane Commission report 2006) can shift the concentration of supply power in the South African market.
The supply of liquid Fuels in SA must not only be seen in terms of keeping the country wet ; we must understand the past ( very favourable margins and cost recoveries ) relative to new environments where new entrants are operating – and not operating ; in spite of huge energies being expended (see transformation)