Sasol could sell cheaper fuel if the petrol price were deregulated – at current oil prices, anyway

Business Insider SA
(Facebook, Sasol)
(Facebook, Sasol)
  • Sasol can produce fuel from coal cheaper than the cost of oil.
  • But South Africa's regulated fuel price is based on the price of oil, and the value of the rand.
  • That means if the petrol price was to be deregulated – as is occasionally proposed – Sasol could, in theory, sell fuel cheap.
  • For more stories, go to the Business Insider SA homepage

At current prices Sasol is producing petrol at below the cost of Brent Crude oil – and in theory it could sell fuel at less than the current regulated petrol price, if it were ever allowed to do so.

Sasol supplies roughly 20% of South Africa’s liquid fuel.

The exact relationship between the oil price and the cost at which Sasol makes fuel from coal is complex, Sasol spokesperson Alex Anderson told Business Insider South Africa.

“While coal is a cheaper feedstock relative to oil, the conversion of coal-to-liquids is a highly energy-intensive, costly and complex process,” Anderson said. 

South Africa’s official fuel price is set monthly by the department of energy in a calculation heavily influenced by the price of Brent Crude and the rand/dollar exchange rate.

A recent policy proposal by the national treasury, however, could see the the fuel price deregulated. 

Read: Treasury wants to deregulate the petrol price - but an analyst believes this will not bring cheaper fuel, only more price volatility

The department of energy did not answer direct questions about the extent to which the current fuel price structure benefits Sasol. 

The apartheid government created Sasol in the 1950s to use technology developed by scientists in Nazi Germany to turn coal into liquid fuel. 

This was particularly important as the country faced escalating international sanctions which placed pressure on its oil imports, and therefore the country’s energy security.

The now listed public company is today one of the world’s largest producers of synthetic fuels out of coal, Anderson said. 

Since 2017 Sasol no longer invests in fuel refining capacity, instead focussing on chemicals.  

“Creating additional fuel production capacity using our existing processes is highly capital intensive, and would be challenging to justify economically and from an emissions/environmental perspective,” Anderson said. 

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