Saudi tensions could increase SA fuel prices

The recent political upheaval in Saudi Arabia will lead to South African motorists paying an additional 70 to 80 cents more for fuel in December. And there could be a further increase of about 60 cents in January if current tensions persists, says Econometrix chief economist Azar Jammine.

Oil, which has traded at about $50 a barrel for the past two years, shot up on Monday by $10, reacting to tensions in Saudi Arabia — the world’s largest producer of oil. This is the highest price since 2015.

Soon to be king, Prince Mohammed bin Salman — or MBS, as he is popularly known — has in recent days arrested dozens of princes and business leaders in what he claims is an anti-corruption drive.

Those arrested include billionaire investor Prince Alwaleed bin Talal and Ibrahim al-Assaf, a director of Saudi Aramco, the country’s oil ­company .

Last year, the crown prince proposed an initial public offering in Aramco to stabilise the global oil price, but the current political turmoil has raised doubts that the listing will go ahead. 

But already warnings have sounded that the initial public offering would raise less than the hoped-for $100-billion and more like $65-billion. For Saudi Arabia, it has implications for the kingdom’s ability to wean its economy off oil.

For the rest of the world, analysts say the Saudi Aramco listing would not change the negative financial position the oil producer has had for the past few years.

“Following three years of soft prices on crude, economists expected a gradual increase in prices but this development will hike prices significantly,” says Jammine. “With the rand currently at an anaemic R14.07 and continuing to grow weaker, the rand dollar exchange rate will make paying for fuel more expensive.”

And for South Africa, the current political turmoil in the kingdom will continue to translate into fuel price increases, which will translate to higher food and transport costs also, says Nedbank economist Isaac Mashego.

It remains to be seen how the Organisation of the Petroleum Exporting Countries (Opec) will respond to the latest spike in oil prices. Opec, which includes Russia and 10 non-Opec countries — and with Saudi Arabia as the biggest influencer — agreed in November 2016 to curb crude production by 1.8-million barrels until March 2018.

The organisation is scheduled to meet later this month. — Thulebona Mhlanga is an Adamela Trust trainee at the Mail & Guardian

PW Botha wagged his finger and banned us in 1988 but we stood firm. We built a reputation for fearless journalism, then, and now. Through these last 35 years, the Mail & Guardian has always been on the right side of history.

These days, we are on the trail of the merry band of corporates and politicians robbing South Africa of its own potential.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Thulebona Mhlanga
Guest Author
Advertisting

LIVESTREAM: Ramaphosa addresses a locked down nation

President Cyril Ramaphosa is scheduled to address the nation on the measures currently being undertaken to contain the coronavirus pandemic

The rule of law in times of crisis: Covid-19 and...

Under a state of national disaster, some rights may be suspended. But it is critical to remember that the Constitution itself is not suspended

Test backlog skews SA’s corona stats

With thousands of samples still waiting to be processed, labs are racing to ramp up testing to help the government gain a better idea of how prevalent Covid-19 really is

Press Releases

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world

SAB Zenzele special AGM rescheduled to March 25 2020

New voting arrangements are being made to safeguard the health of shareholders

Dimension Data launches Saturday School in PE

The Gauteng Saturday School has produced a number of success stories