South Africa's distance from the world's large oil producing and refining centres has meant that a system of import parity pricing (IPP) has developed, where domestic fuels are priced according to the marginal price of replacing them with supply from international trading hubs in Europe, the Middle East or Asia Pacific.
For gasoline or diesel these IPPs are enshrined in the government mandated Basic Fuel Price (BFP) formulas, which govern prices at the pump. But the market for jet fuel is unregulated, and each supplier has developed its own version of the BFPs, meaning competition is hard to judge and airlines have difficulty comparing bids received in their fuel buying tenders.
To help bring clarity to this trade, global energy and commodity price reporting agency Argus launched a daily price index for jet fuel delivered to Durban, South Africa, as an import-parity reference price for jet fuel suppliers, trading firms and airlines operating in the region.
The jet fuel cost and freight Durban cargo price can be found in the daily Argus Jet Fuel and Argus Asia-Pacific Products reports, and is based on the jet fuel price in the Mideast Gulf, adjusted for the cost of transportation of 35 000 t jet fuel cargoes from the Mideast Gulf to the key South African import location of Durban, as assessed in the daily Argus Freight report.
South Africa is usually self-sufficient in jet fuel, but relies on imports, mostly from the Mideast Gulf or the west coast of India, when refineries are shut down for maintenance. Until now, the market has lacked an independent price reference that buyers and sellers of jet fuel can use when negotiating term supply contracts at the key OR Tambo Johannesburg aviation hub, which is connected to Durban by pipeline.
Argus Media Executive Chairman and Publisher Adrian Binks said: "Argus is pleased to be the first global price reporting organisation to publish a South African price reference for jet fuel, and to bring transparency to the rapidly growing African aviation market."
Adapted from press release by Francesca Brindle
Read the article online at: https://www.hydrocarbonengineering.com/refining/16112015/argus-creates-dpi-for-south-african-jet-fuel-1739/