Who’s to blame for high oil prices?
Two of South Africa’s leading economists say Opec, which operates ‘like a cartel’ is at fault, but trade organisation Sapia disagrees.
A perfect storm of issues has seen oil prices rally about a third from their 2018 lows. Picture: AFP
Although two of the country’s leading economists yesterday insisted that the Organisation of Petroleum Exporting Countries (Opec) operated “like a cartel” by colluding on setting world oil prices, the South African Petroleum Industry Association (Sapia) has come out in defence of Opec.
Against a background of a hike in fuel prices in South Africa, coming into effect tomorrow, Avhapfani Tshifularo, the executive director of Sapia – a trade organisation representing the main petroleum and liquefied petroleum gas companies – scoffed at views expressed by economists Jason Urbach and Laura Campbell that Opec controlled oil prices.
“Oil prices are determined by market forces – demand and supply of oil in the international oil market. Opec does not control oil prices,” said Tshifularo.
He said petrol prices in South Africa were “not the most expensive” in the world.
“The countries listed as being the cheapest … are mainly oil-producing nations.
“They receive oil revenue from their wells and possibly also subsidise their petrol prices, whereas South Africa is not an oil-producing nation and does not subsidise the petrol price.
“A significant portion of petrol prices is taxes that are levied off petroleum products and most oil-producing nations have lower or no taxes at all because they can receive oil revenue from crude oil sales,” explained Tshifularo.
With prices ranging from 11 cents per litre of petrol to R5.50, the 10 countries regarded as cheap are Venezuela, Iran, Sudan, Kuwait, Algeria, Egypt, Ecuador, Nigeria, Turkmenistan and Syria.
Listed as the most expensive countries per litre of petrol are Iceland (R27), Hong Kong (R26.67), Norway (R25.72), Holland (R24.83), Greece (R24.31), Monaco (R24.15), Italy (R24.14), Israel (R24.03), Denmark (R24.02) and Portugal (R23.50).
Urbach, of the Free Market Foundation, said: “Opec operates like a cartel. It manipulates supply and demand of oil throughout the world. Not all oil-producing countries are members of Opec.”
This view was shared by Econometrix’s Campbell. “There are risks to the supply of oil – which Opec will undoubtedly be aware of – which could push oil prices upwards.
“These include geopolitical risks in Iran and Venezuela, both Opec members,” said Campbell. “With regard to Iran, there is a fear that Iranian oil supplies could be interrupted in the event of the US withdrawing from the Iranian oil agreement.”
Urbach called on the government to “maintain fiscal discipline by decreasing spending”.
“Money derived from petrol revenue is not going where it should go because of corruption and wasteful expenditure,” he said.
– brians@citizen.co.za
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