Africa urged to negotiate steeper oil discounts
Sanctions on Russia an opportunity
From February 5, the European Union, the G-7 and its allies will attempt to impose a cap on the price of Russia's fuel exports.
The market is bracing itself for new shocks due to the introduction of the European Union’s embargo on Russian oil, the ministry of mines and energy said.Fin24 recently reported that from February 5, the European Union, the G-7 and its allies will attempt to impose a cap on the price of Russia’s fuel exports, the latest punishment for its invasion of Ukraine. That will coincide with an EU prohibition on almost all imports of Russian oil products.
Similar measures are already in place on the country’s crude shipments, but it is the cap and ban on refined fuels, and in particular diesel, that has some oil-market watchers concerned about the potential for price spikes.
Prior to its invasion of Ukraine, Russia was Europe’s largest external supplier of the fuel and the continent has continued to buy in big volumes right up to the cutoff. As a result, the sanctions are likely to see a great rerouting of global diesel flows — aided by Russia’s new crude buyers sending fuel back to Europe. In the short-term, there’s a risk of higher prices.
On the other hand, US Treasury Secretary Janet Yellen was recently quoted Fin24 saying the price cap on Russian crude oil to limit Russia’s revenues could save the 17 largest net oil-importing African countries US$6 billion annually. Yellen said some emerging market countries were saving even more by using the price cap to negotiate steeper discounts with Russia, and the Treasury was encouraging others to follow suit.
Despite the uncertainties, local motorists got some relief as fuel prices will remain unchanged for the month of February. The price of diesel at Walvis Bay will remain at N$20.65 per litre, while petraol will stay at N$18.28 per litre.
South Africa
Meanwhile in South Africa, petrol and diesel prices look set to be hiked in the first week of February. The latest data from the Central Energy Fund (CEF) shows an expected increase of around 52 cents a litre for 95 unleaded petrol and 57 cents per litre (c/l) for 93 petrol. The diesel price could climb by between 22c/l and 33c/l, while the price of illuminating paraffin could increase by around 38c/l.
While the rand has remained relatively firm against the dollar, the oil price has strengthened in recent weeks. After falling to below US$78 a barrel in the first week of January, it’s now above US$86 as traders expect that demand from China will strengthen as its economy reopens.
A 52c hike in the petrol price will take Gauteng 95 unleaded to above R21.90 a litre – from R20.14 a year before.
Diesel looks on track for a rise to between R21.44 and R21.55 a litre – from R18.04 a year ago. The Gauteng diesel price has not been below R21 since March last year, after Russia’s invasion of Ukraine triggered a spike in oil prices.
“Any increases to fuel prices now, at a time when South Africans are grappling with, among other issues, financial pressures and rolling blackouts, is unwelcome. We again want to urge the government to revisit the fuel pricing structure with a view to finding ways to mitigate against this and other possible increases in future,” notes the Automobile Association (AA).Additional reporting by Fin24