JOHANNESBURG - The rising crude oil price presented a huge threat to the South African economy, Department of Energy deputy director-general for petroleum and petroleum regulation Tseliso Maqubela said this week.
Oil prices have been increasing as a result of a number of factors including heightened demand and the crisis in Venezuela. The oil prices look set to to remain at elevated levels following the US decision to re-impose sanctions on Iran, the world’s fifth-largest oil exporter.
The US has pulled out of a July 2015 nuclear deal with Iran in terms of which Iran undertook not to seek, develop or acquire any nuclear weapons. Other signatories of the deal are China, France, Germany, the Russian Federation and the United Kingdom (UK).
Brent crude oil price was US$77.01 at 17.28pm on Thursday.
Maqubela said the the rising crude oil price presented the biggest threat to the South African economy. He said the oil price was unlikely to fall below US$70 a barrel in the near future. “We were at $30 a barrel in December 2015 and we are at $76 a barrel (on Thursday morning).
Bloomberg last month reported that oil exporter Saudi Arabia wanted the oil price to range between $80 and $100.
“So once the price gets to $80, it is unlikely to come down. So we must find ways of dealing with that. We must find our own oil. That is the only way. We should explore for oil,” said Maqubela.
Maqubela said even though South Africa did not import oil from Iran, South Africans would feel the impact of the high oil prices in fuel prices.
Meanwhile, Maqubela said the Department of Energy would involve other departments in its dealings with the petroleum industry with regard to the refinery upgrades needed for the move to clean fuels. There is lingering uncertainty about how the oil companies would recoup the costs of upgrades. The South African Petroleum Industry Association (Sapia) had previously estimated that upgrades could cost R40 billion.
“We have resolved that we cannot do the clean fuels support programme without the involvement of the (Department of Trade and Industry) and the Department of Economic Development because we do not believe that the motorists should shoulder the support programme alone,” said Maqubela.
He said the government had already taken steps to support the industry. For instance, National Treasury has introduced accelerated depreciation as one of the options to compensate for the investment in clean fuels.
“There was a commitment from former Minister of Finance Pravin Gordhan. The industry came back, saying (the accelerated depreciation) does not go far enough. We now have to at the available mechanisms at (dti) to support re-industrialisation. If we allow these refineries to close, we are de-industrialising,” he said.
- BUSINESS REPORT