By Jeremy Wakeford
Writing for the Policy Matters series, Terry Bell initiated a debate on the pricing of liquid fuels in South Africa ("Sasol rakes in profits while SA feels the pinch", July 29).
He noted that local synthetic liquid fuel producer Sasol - to which should be added state producer PetroSA - is reaping record profits as the volatile international price of crude oil trends upwards, periodically setting new records.
Meanwhile, South Africa's fuel consumers are not benefiting directly from indigenous production, as local retail prices are benchmarked on international costs.
This raises two related policy questions. First, should domestic fuel producers be subject to a windfall tax?
Continues Below ↓
Second, should domestically produced "synfuels" be sold at a discount relative to international prices?
Bell argued that the government has discretion when it comes to the pricing of liquid fuels and that the current formula might not be in the interests of the majority of South Africans, who are "being held to ransom" by suppliers and high prices.
However, from a sustainability perspective, the answers to the policy questions posed above are "yes" to a windfall tax and "no" to discounted synfuel prices.
To understand why, one first has to consider the global energy context, which is dominated by two interconnected issues.
In the first place, as Bell noted in passing, there is convincing evidence that the world has reached, or is perilously close to, the all-time peak of global oil production.
Probably within the next three years, according to many experts using a variety of forecasting techniques, the annual output of oil will begin to fall inexorably as old wells dry up faster than new ones can be brought on stream.
Moreover, the amount of oil available for importing countries such as South Africa will shrink even sooner and faster than total world production, since domestic consumption of oil is growing rapidly in most oil exporting countries.
Continues...
|
StumbleUpon
Reddit
Digg
Delicious
Newsvine
Facebook
muti
Twitter
