By Caroline Hooper-Box
The price of crude oil soared last week, reaching levels last seen after Iraq's invasion of Kuwait in 1990. And the aftermath for South Africa is soon to be a massive rise in fuel costs.
But with the minerals and energy department warning that the fuel price would rise by 36c next month, a question beginning to be asked is whether high fuel prices are set to be a permanent feature of life. If global oil production is on the verge of decline, the answer is yes.
A decline will mean higher prices, and a radical push for alternative energy sources.
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David Francis, writing for the Christian Science Monitor, cites advocates of a production peak coming soon, offering the evidence that:
In 2002, the world used four times as much oil as was newly found;
The rate of discovery of worldwide oil reserves, after declining for 40 years, has slowed to a trickle. In 2000, there were 16 large discoveries of oil, eight in 2001, three in 2002, and none last year, according to the Oil Depletion Analysis Centre in London;
All the giant fields, such as those in the Middle East, have already been discovered, some experts say. These giants are relatively easy to find. The last major oil field, Cantarell, off the shore of Mexico, was discovered in 1976.
Meanwhile, demand keeps growing. China expects its oil needs to have increased five-fold by 2030.
There is no agreement on when oil production will peak. Some experts say it already has, and others talk of a decline from 2010 or 2035.
Colin McClelland, the director of the South African Petroleum Industry Association (SAPIA), said: "As the developing world's demand for energy increases, coupled with problems in Iraq and tension in the Middle East generally, we are in a situation where there is tension in the market. Opec (the Organisation of Petroleum Exporting Countries) may or may not be able to up [its] production in the short term. If [it] decides to increase production, there is still the question of where it will come from. High demand and limited availability means the oil price goes up."
For every dollar the world oil price goes up, South Africa's petrol price responds by 6c or 7c a litre, with a time lag of about two months.
Escalating oil prices made renewable energy look more attractive internationally, said Richard Worthington of Earthlife Africa, and SAPIA's McClelland said much work was being done to investigate alternative energy supplies, particularly in the motor industry.
Most major petroleum companies have started investing in solar and wind energy projects, and the department of minerals and energy is expected to release by the end of the month a strategy paper on renewable energy that will set targets for energy production using solar, wind, biomass and hydro-power.
Meanwhile, representatives of at least nine of the 11 Opec member states were in Amsterdam on Saturday to discuss a proposal by the group's de facto leader, Saudi Arabia, to raise its output ceiling by 8,5 percent to try to halt the spike in crude prices ahead of a conference of energy producers and consumers.
Oil prices fell by as much as $1 a barrel after Saudi Arabia said on Friday that it would push Opec to raise its daily ceiling by two million barrels in an effort to safeguard global economic growth and ease concerns about possible shortfalls in supply.
"We do encourage and support any proposal to increase the production ceiling level. We believe that the high oil price harms economic growth. We ought to try to preserve the stability of the market," said Iraq's oil minister, Ibrahim Bahr al-Uloum.
An unforeseen surge in global demand has stretched crude supplies, and concerns about security problems in the Middle East have contributed to market turmoil. Crude prices have soared above $40 a barrel, and Opec, which decided only in March to cut its official output, has come under growing pressure from the United States and other nations to boost production.
Opec officials are unlikely to agree on a higher target until all its members are gathered for a planned June 3 meeting in Beirut.
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