Energy Minister Jeff Radebe says the department is intensifying efforts to cap and bring down the escalating cost of fuel.
The Minister said this when the department briefed the Portfolio Committee on Energy in Cape Town, on Tuesday.
The briefing comes after concerns from various sectors of the economy over the escalating cost of fuel, with commentators saying this would have an impact not only on the business sector, but on disposable household income.
Radebe said it should be recognised that fuel prices are cyclical in a sector that contributes 8.1% 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 that 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.
Briefing Members of Parliament on Tuesday, Radebe said in January 2016, before the OPEC decision, crude oil prices stood at below US$30 per barrel.
After OPEC took a decision to remove 2% of the global oil production to support higher oil prices, oil prices have more than doubled in two years and this year, crude oil prices currently stand at US$80 per barrel.
To a large degree, Radebe said, OPEC has achieved their objective to the detriment of petroleum consumers globally.
Radebe said high oil prices can also be attributed to geo-political instability. The recent political turmoil in Venezuela, which has led to a near collapse of oil production in that country, has had a dire effect on the global market.
Radebe said this was the case in Libya following the change of government in 2011, which has led to that country going from producing 1.5 million barrels per day to an average of 600 000 barrels per day.
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.
But Radebe told MPs on Tuesday that government’s focus was on interventions that are aimed at turning the situation around.
“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 that] we can have better control of fuel [prices] through domestic production of fuel and gas.”
SAnews.gov.za
https://www.africaprimenews.com/2018/03/30/news/south-africa-announces-pump-price-increase-of-petroleum-products/
