CAPE TOWN, The Department of Energy is intensifying efforts to cap and bring down the escalating cost of fuel, the Minister, Jeff Radebe, told Parliament's Portfolio Committee on Energy here Tuesday.
The briefing came after concerns were voiced by 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 recognized that fuel prices are cyclical in a sector which contributes 8.1 per cent 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 came not long after Ministers in the Cabinet's economic cluster released a statement expressing the 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 Organization 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 30 US dollars per barrel. After OPEC took a decision to remove 2.0 per cent of the global oil production to support oil prices, the price more than doubled in two years and this year, crude oil prices currently stand at 80 USD per barrel.
To a large degree, Radebe said, OPEC has achieved its 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 led to that country going from producing 1.5 million barrels per day (bpd) to an average of 600.000 bpd.
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 Unitd States' 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.
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," he added.
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.
Source: NAM NEWS NETWORK