Middle East war threatens SA fuel supply
· Citizen
While the Middle East war is about to rocket fuel prices into the stratosphere – by between R4 and R6 a litre for petrol – an even bigger worry is that if the conflict drags on, South Africa may face an actual fuel shortage.
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The last time this happened – in the crisis caused by the 1973 Arab-Israeli war, in which oil producing countries stopped exports – there were queues at fuel stations across the world.
The 1973 oil crisis
This country almost ground to a halt, with the government being forced to introduce emergency rationing measures, including a ban on all fuel sales at night and over weekends, as well as a reduction in the national speed limit to just 80km/h.
And that was at the height of apartheid, when the National Party government had massive emergency fuel reserves managed through the Strategic Oil Fund, as well as refineries to process the stored crude oil.
Today, many of those refineries have closed and dodgy dealings related to the fund, which is part of the Central Energy Fund group, are believed to have reduced South Africa’s emergency fuel back-ups significantly.
Dependence on imported fuel supplies
Much of this country’s fuel supply comes from the Gulf region and the United Arab Emirates (UAE) in particular and, said the DA spokesperson on mineral and petroleum resources James Lorimer, supplies are “vulnerable”.
Oil tanker traffic through the Strait of Hormuz choke point has slowed to a trickle because of an effective Iranian blockade.
“If it goes on for another two weeks, then we’re okay. But if it goes on for two months, we might well be in trouble,” said Lorimer.
He said there is a risk supplies from the UAE could be cut off. He also said the situation is difficult to assess because of limited public information on fuel reserves and supply chains.
“It’s really opaque. It’s very difficult to work out what’s going on,” he said.
But Lorimer said it was evident South Africa’s domestic refining capacity has declined significantly, meaning the country now relies heavily on imported, processed fuel.
Oil companies are notoriously reluctant to speak publicly, as media exposure generally offers them no commercial advantage.
Government departments and officials are unlikely to provide clear answers about the situation, even if contacted.
Based on the limited information available, Lorimer said the situation represents a potential risk that warrants concern, even if the exact severity is still unclear.
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Price and inflation impact warning
MJ Khan from Sasol, which supplies about 39% of SA’s fuel needs, said: “Sasol continues to supply as normal and has established operational measures in place to manage potential volatility in global markets.”
Organisation Undoing Tax Abuse CEO Wayne Duvenage believes it is more likely there will be fuel price pressure than outright shortages.
Duvenage said rising oil prices could significantly push up the price of petrol.
He said the basic fuel price is determined by international oil prices and the exchange rate, while taxes and levies account for a significant portion of the pump price.
“About 45% of our petrol price is made up of taxes and levies. The basic fuel price is around 43% and is based on the oil price and the rand-dollar exchange rate,” he said.
Economic and industry concerns
Motor Industry Staff Association (Misa) chief executive officer of operations Martlé Keyter said the association was concerned about the possibility of another fuel price increase as a result of the conflict in Iran.
Keyter said Misa has consistently raised concerns about the government’s failure to review the country’s fuel pricing methodology, despite promises made in previous budgets.
“Without a transparent and credible system, workers and consumers are left vulnerable to repeated increases with little accountability,” she said.
“Fuel price increases also have a direct impact on the competitiveness of the motor industry. Dealerships and workshops rely on affordable transport to deliver services, parts and vehicles.”
She said when fuel costs rise, these businesses face higher operating expenses, which can lead to reduced profitability and threaten jobs.
“Workers spend a disproportionate share of their income on public transport,” she said. “Each fuel price increase erodes their ability to provide for their families and undermines their quality of life.”
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The situation ‘could get much worse’
Economist Dawie Roodt said he didn’t think the petrol price would increase by R8 at this stage.
“Here’s trouble on several levels. The petrol prices are going to increase, but also the diesel and fertiliser prices, and by a lot,” he said.
“That means higher inflation, which means higher interest rates and everything that goes with that. It also means poor economic growth, the interest rates and everything that goes with that.”
Roodt said about two weeks ago, with the budget of Finance Minister Enoch Godongwana, “we were very excited because things didn’t look too bad”.
“But that story is now off the rails. What we have now is not a good situation and it could get much worse. Yes, it could get better, too, but the system is shocked and it’s already baked in,” he said.
South Africans abroad monitor situation
In the meantime, a South African living and working in Abu Dhabi said “things are looking okay”.
“We are back at the office. We also got another missile alert a few minutes ago, but that’s over now. Life goes on.”
The South African, who agreed to speak anonymously, said they have still not heard from the South African Embassy.
“The Travel Smart app still doesn’t have any notifications. Yesterday, we went to the South African restaurant in Par, where there were many South Africans, and they were also not in a hurry to get back. We are safer here, statistically speaking, than in our country.”
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