As uncertainty in the Middle East continues, South Africa is facing soaring fuel costs and potential supply disruptions. In response, businesses, farms and even households are increasingly storing petrol and diesel on-site in larger quantities than usual. This is happening despite the country’s fuel supply remaining fundamentally stable for now. How this plays out over the coming weeks and months depends heavily on what happens in the middle east and the impact on global logistics and oil supply.
While stockpiling may seem like a practical short-term solution to navigate the uncertainty of fuel supply and pricing, it introduces a range of unintended consequences. Clayton Ellary, Executive Head: Mid-Market Clients & Broking at Aon South Africa, cautions that increased fuel storage can significantly alter both risk exposure and insurance implications.
“The moment materially larger volumes of fuel are stored on site, the risk exposure fundamentally changes. Fire load increases dramatically. Vapour and handling risks increase. The potential for injury, third-party harm and environmental damage increases. Critically, the insurance assumptions that were valid before the stockpiling will no longer apply,” Ellary explains.
A Highly Regulated Risk
Fuel is not ordinary stock. It is a hazardous, highly flammable substance that requires strict control, appropriate containment and careful handling. Municipal petroleum by-laws typically require registration or approval once flammable liquids exceed certain thresholds and may mandate purpose-built storage facilities beyond specific volumes.
In South Africa, fuel storage is governed by a robust regulatory framework. This includes municipal fire safety by-laws, the Occupational Health and Safety Act (OHSA) 85 of 1993, the National Environmental Management Act (NEMA), and Hazardous Chemical Agents Regulations. In addition, the South African Bureau of Standards (SABS) sets out technical requirements through various SANS codes covering storage, handling, transportation and building compliance.
“This means the issue is not simply whether fuel is stored on site, but whether it is stored lawfully, safely and in compliance with all applicable requirements,” Ellary notes. “From an insurance perspective, undeclared or non-compliant storage can have serious repercussions.”
The Insurance Implications of Non-Disclosure
Insurance is structured around disclosed risk. When a property that is typically used for light commercial activity or general warehousing begins storing significantly larger quantities of fuel, this may constitute a material change in risk.
Insurers are likely to ask three key questions:
- Was the increased exposure disclosed?
- Are the premises compliant with applicable regulations and by-laws?
- Are appropriate risk controls and precautions in place?
While the potential for property damage is clear, the broader liability exposure is often underestimated.
“The consequences of a fire or explosion extend far beyond the insured premises,” Ellary explains. “Damage can spread to neighbouring buildings, vehicles and infrastructure. If individuals – whether employees, contractors, tenants or members of the public – are injured due to unsafe storage or handling, the legal and financial implications can be dire. These risks may include bodily injury claims, damage to adjacent properties, environmental harm and regulatory scrutiny regarding the management of hazardous substances.”
Operational and Health Risks
Once fuel storage becomes part of daily operations, it must be treated as a formal risk exposure. Employers are required to provide appropriate training, information and safety protocols before any exposure occurs.
Petrol and diesel present not only fire hazards, but also health risks. Fumes can accumulate in poorly ventilated areas, while improper handling can lead to vapour ignition, skin exposure, inhalation-related illness and dangerous spill events. Regulations may also require exposure assessments, record-keeping and, in some cases, medical surveillance.
Aon highlights some of the risks associated with fuel storage:
- Safety and fire/explosion risk: Large fuel volumes are highly combustible; leaks or vapour build up can ignite from sparks, static, hot work, or faulty equipment. Inadequate separation distances from buildings, parking areas, or public roads can magnify the impact of an incident.
- Environmental and pollution risk: Spills or slow leaks can contaminate soil and groundwater, sometimes going unnoticed for long periods. Inadequate bunding/secondary containment, poor drainage control, or damaged tanks make spills more likely and harder to contain. Cleanup and remediation costs can be very high and may trigger regulatory investigations or penalties.
- Operational and business interruption risk: A serious fuel related incident can shut down operations, disrupt logistics and supply chains, damage critical equipment and infrastructure. Even a smaller event can tie up resources in remediation and investigations, delaying normal business.
- Quality, contamination, and equipment damage: Long term storage can degrade fuel quality (e.g., water ingress, microbial growth, sediment). Contaminated or degraded fuel can damage engines and generators, leading to equipment failure, increased maintenance and replacement costs and loss of critical services (e.g., backup power in hospitals or data centers).
- Security and theft risk: Large, visible fuel stores can be a target for theft, vandalism, or even intentional damage. Poor access controls, lighting, or monitoring increase the probability and severity of these events.
Fuel stockpiling raises safety, environmental, regulatory, liability, operational, quality, and security risks. The more fuel stored (and the longer it is kept), the more important proper design, maintenance, monitoring, and emergency planning become.
A Risk That Requires Deliberate Management
Stockpiling fuel is not simply a logistical decision – it is a governance issue that should be addressed at both management and board level.
“Stockpiling fuel is a risk decision,” Ellary emphasises. “If something goes wrong, it quickly becomes an insurance, liability, regulatory and reputational issue all at once.”
Any organisation considering increased on-site fuel storage should first review its insurance programme, policy conditions, property protections and compliance obligations. Importantly, any material changes in fuel volumes or storage arrangements should be disclosed to brokers and insurers. Insurers may impose special conditions or higher deductibles for large fuel storage, reduce or deny coverage if risk controls or regulations are not followed, and will require engineering surveys, tank testing, and emergency response plans.
On this front, Aon’s risk advisors are invaluable in helping businesses identify every aspect of physical and pure risk, identifying and quantifying, giving advice on how these risks should be managed, and providing focused risk-related consultancy services where required.
In volatile conditions, resilience matters. But resilience should not come at the cost of creating new, unmanaged hazards. The better approach is to plan carefully, disclose early, store safely and treat fuel for what it is: a high-risk exposure that demands proper risk management and control,” concludes Ellary.
