Get more Mail & Guardian
Subscribe or Login

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

Subscribe for R500/year

Thanks for enjoying the Mail & Guardian, we’re proud of our 36 year history, throughout which we have delivered to readers the most important, unbiased stories in South Africa. Good journalism costs, though, and right from our very first edition we’ve relied on reader subscriptions to protect our independence.

Digital subscribers get access to all of our award-winning journalism, including premium features, as well as exclusive events, newsletters, webinars and the cryptic crossword. Click here to find out how to join them and get a 57% discount in your first year.

Thulebona Mhlanga
Guest Author

Related stories


If you’re reading this, you clearly have great taste

If you haven’t already, you can subscribe to the Mail & Guardian for less than the cost of a cup of coffee a week, and get more great reads.

Already a subscriber? Sign in here


Subscribers only

Fears of violence persist a year after the murder of...

The court battle to stop coal mining in rural KwaZulu-Natal has heightened the sense of danger among environmental activists

Data shows EFF has lower negative sentiment online among voters...

The EFF has a stronger online presence than the ANC and Democratic Alliance

More top stories

Eastern Cape premier Mabuyane lives large amid province’s poverty

Oscar Mabuyane and MEC Babalo Madikizela allegedly used a portion of state funds for struggle icon Winnie Madikizela-Mandela’s commemoration for their own benefit

Constitutional court confirms warrantless searches in cordoned off areas unconstitutional

The law was challenged in response to raids in inner Johannesburg seemingly targeting illegal immigrants and the highest court has pronounced itself 10 days before an election in which then mayor Herman Mashaba has campaigned on an anti-foreigner ticket

A blunt Mantashe makes no promises during election campaigning

ANC chairperson Gwede Mantashe told people in Daveyton to stop expecting handouts from the government

Mbeki: Social compact the answer to promises made in ANC...

Former president Thabo Mbeki urged business and government and society to work together to tackle issues such as poverty, unemployment and poor services and infrastructure

press releases

Loading latest Press Releases…