Minerals Resources Minister Gwede Mantashe has shot down suggestions that South Africa should approach Russia and negotiate a deal to buy oil directly from them as a means of mitigating rocketing fuel prices in the country.
MINERALS Resources Minister Gwede Mantashe has shot down suggestions that South Africa should approach Russia and negotiate a deal to buy oil directly from them as a means of mitigating skyrocketing fuel prices in the country.
South Africa is currently grappling with record fuel price hikes as the elevated global price of Brent crude oil reached 14-year highs this month following sanctions by Western countries on Russian oil.
Briefing Parliament yesterday, Mantashe said that South Africa would not follow their BRICS partners’ forays in seeking deals with Russia, but allow market forces to dictate.
“We don’t buy from Russia. There is something that is called the market. It’s not an issue of which country you buy [from],” Mantashe said.
“There is a cartel like Opec where the price of oil is determined at a global level, if it’s $140 per barrel even if you buy it in Angola.
“[Going to Russia] is ignoring an important issue of how markets work, particularly where there is a cartel.”
Mantashe was responding to questions from opposition Members of Parliament during the meeting of the portfolio committee on mineral resources and energy.
The main reason South Africa imports refined oil such as petroleum, jet fuel, lubricants, bitumen, paraffin, liquefied petroleum gas and others, is that it does not have the requisite refining capacity.
Russia has offered oil and other commodities at a heavy discount to India and the country is considering the offer while sorting out issues like tanker, insurance cover and oil blends.
Saudi Arabia oil giant Sarmaco on Tuesday signed a $10 billion (R151bn) contract to build a refining and petrochemical complex in China that will be supplied with Russian oil.
Mantashe’s assertions were strongly supported by the DA’s MP Kevin John Mileham, who said Russia was out of the question as South Africa did not import any oil or refined petroleum from them.
The major import sources for South Africa’s 450,000 barrels a day of crude oil are Saudi Arabia, Nigeria, Angola, Ghana, Togo and Norway.
South Africa also imports about 200,000 barrels a day of refined products from Oman, the United Arab Emirates, Singapore India and Bahrain.
“While I accept that Russia is a significant player supplying about 7-11 percent of global production, there are other sources of oil and petroleum products that we should be looking at rather than focusing much attention on Russia,” Mileham said.
As the upward trend in global oil prices continues to put pressure on domestic petrol prices, the government is weighing reviewing the petrol price methodology to slow the hike.
Mantashe said discussions between him and his finance counterpart Enoch Godongwana in this regard, and its attendant impact on the fiscus, were under way.
Last month, Finance Minister Godongwana announced that the basic fuel levy and the Road Accident Fund levy, which constitute 30 percent to the basic fuel price, would remain unchanged to provide a R3.5 billion relief to motorists.
“We are also discussing whether it is possible to remove the demand-side management levy of taxes per litre on unleaded 95 or implement a price cap on unleaded 93,” Mantashe said.
“We are also discussing availing part of the strategic stock to the local refiners as the war rages on.”
The price of Brent crude fell below $100 per barrel for a second consecutive day on Tuesday.
FXTM’s senior research analyst Lukman Otunuga said oil benchmarks were under pressure as investors evaluated demand risks from China’s imposed lockdowns and the Ukraine-Russia ceasefire talks.
“The global commodity is likely to remain sensitive to geopolitical risks and supply-side factors, especially as Russia’s oil imports are banned further,” Otunuga said.
– BUSINESS REPORT