The Department of Mineral Resources and Energy (DMRE) has blamed the soaring fuel price on the Organisation of the Petroleum Exporting Countries (OPEC) and its partners.
The department said it was disappointed by last month’s decision of OPEC and its partners not to release more oil to the market in the face of high oil prices.
“Increasing oil production is a lever that is well within OPEC’s control, and for reasons best known to them, they are unwilling to use it,” it said in a statement.
While the DMRE noted the justified anxiety of motorists and consumers in general, it wants South Africans to know the price increases are having a ripple effect globally.
“This is a global energy challenge, and many governments believe that OPEC and its partners can do more to alleviate the situation,” it stated.
“The DMRE wishes to assure consumers the fuel increases experienced are not dissimilar to record-breaking increases in New Zealand, Australia, Canada, the UK, Singapore and other non-oil producing countries.”
“The United States has seen pump prices rise by over 60% in the last 12 months. The attempt by the US government to moderate crude oil prices by releasing strategic oil reserves did little to lower prices,” said the DMRE.
Understanding whats behind the increases:
There are two reasons for these increases:
- OPEC and its partner decided not to increase production of crude oil, despite the global demand which has returned to pre-covid-19 levels. The price of crude oil which is the main feedstock for refined fuels has doubled in the last twelve months from about $40 per barrel to over $80 per Barrel.
- The is an imminent shortage of heating fuels as the Northern hemisphere enters its winter season. This is putting pressure on all heating fuels and explains why diesel and paraffin increased more than petrol in November. Europes Natural Gas Prices have increased by about six times since last year.
“The upward trend has unfortunately been unabating, and economies around the world, including South Africa, are going to be impacted negatively, as the prices of goods could rise given the increasing transport costs,” said the DMRE.
“Furthermore, the inflationary nature of global fuel prices is influencing the posture of many central banks.”
The DMRE said that calls for a change in the pricing system were premature because the same system had passed through the lower crude oil price impacts in the middle of the pandemic last year.
“This system is highly predictable and ensures the security of fuel supply countrywide,” said DMRE.
“The DMRE notes that the crude oil prices have retreated by more than 10 % in the face of new Covid concerns, and this will have the impact of moderating fuel prices.“
(Compiled by Narissa Subramoney)