Fuel costs - what is being done?

 

 

By Colin Windell

The Department of Energy is looking into ways to cap and trim rising fuel prices according to Energy Minister Jeff Radebe, who briefed the Portfolio Committee on Energy in Cape Town earlier this week.

No specifics of how cuts can be made were provided by Radebe and consistently emphasised the international price of crude oil as the determining factor, deflecting from local add-on taxes and levies such as that paid to the ailing Road Accident Fund.

The briefing was initiated after concerns from various sectors of the economy over the escalating cost of fuel, pointed out this would have an impact not only on the business sector, but on disposable household income.

Radebe said it should be recognised fuel prices are cyclical in a sector that contributes 8.,% to the country’s Gross Domestic Product (GDP) and one that accounts for 100 000 direct and indirect jobs.

“In the short-term, we have had to intensify our fuel-saving measures. We have had to intensify engagements with oil-producing countries, with a view of indicating to them the impact of high crude oil prices on developing economies but also seek to obtain pricing regimes that would be favourable to our economies,” he said.

Radebe’s remarks come not long after Ministers in the economic cluster released a statement expressing government’s concern over the increasing fuel prices in South Africa in July.

In the statement, the Ministers explained as a non-oil producing country, South Africa has to accept the price of crude oil, as determined by the international market.

In the main, the Organisation for Petroleum Exporting Countries (OPEC), together with the Russian Federation, took a decision to cut oil production in order to eliminate an oil glut in the market, which was keeping prices of crude oil very low.

Radebe said in January 2016, before the OPEC decision, crude oil prices stood at below US$30 per barrel but after OPEC took a decision to remove 2% of the global oil production to support higher oil prices, oil prices more than doubled in two years and this year, crude oil prices currently stand at US$80 per barrel.

Markets have also had to factor in the decision by the United States in May to withdraw from the Joint Comprehensive Programme of Action (JCPOA), which was signed with Iran, and the US’s threat to impose sanctions on Iran – which will include punitive measures on Iranian oil and gas in the form of an embargo on oil and gas exports.

“There are technical teams from the Department of Energy and National Treasury that have started to work on the review of the fuel price structure, as indicated by the President about two months ago… to see whether there can be any adjustments that can be made.

“We have to finalise the framework for the exploration of oil and gas so we can have better control of fuel prices through domestic production of fuel and gas.”