15 March 2022 PORTFOLIO COMMITTEE PRESENTATION TO

Transcript:15 March 2022 PORTFOLIO COMMITTEE PRESENTATION TO:
15 March 2022 PORTFOLIO COMMITTEE PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES AND ENERGY ON THE IMPACT OF INCREASING PRICES ON THE ECONOMY AND POSSIBLE ALTERNATIVES IN ADDRESSING INCREASES IN THE FUEL PRICES CONTENTS Background Causes of High Fuel Prices Emerging global Diesel shortage Role of the Russian Federation in Global Energy Supply Impact on the Economy Interventions Conclusion 3 BACKGROUND Fuel Prices globally and indeed nationally have reached unsustainable levels South African Liquid Fuel Prices have reached record levels The conflict in Europe is disrupting supply chains This is a global issue and no country is going to be spared Developing Economies will suffer more than developed countries Economies will struggle to support any form of growth Increases in excess of than R2 per litre must be expected in this period 4 CAUSES OF HIGH FUEL PRICES Since the beginning of the year, there has been more than a 50% increase in the price of crude oil, which has moderated to about 30% increase The price of crude oil is affected by various factors but the greatest is geopolitics. The conflict is no longer a Russian-Ukraine conflict, but NATO countries have been drawn economically into the conflict The imposition of sanctions on the third largest producer of oil is having some unintended consequences 5 CAUSES OF HIGH FUEL PRICES The second is a stance taken by the OPEC+ to manage the increases in production of crude oil in support of higher prices OPEC+ stance of limiting crude supply is an issue Saudi Arabia and Russian Federation are the two biggest members of OPEC+ The third issue is the Post Covid supply-demand imbalance The Oil and Gas Market underestimated the pace of rebound of economies post successful vaccination campaigns in many countries Global economies are consuming slightly more than what is produced – resulting in an upward pressure on the oil price 6 EMERGING GLOBAL DIESEL SHORTAGE The stability of global supply has been highly disrupted There is a growing global shortage of diesel Jet Fuel Shortages globally will increase as the Northern Hemisphere moves to the driving season Demand for diesel is increasing as some diesel is diverted to the war effort Diesel stocks globally were very low coming out of the lockdown period and have battled to recover 7 RUSSIAN FEDERATION The top three oil Producers in the world are the US, Saudi Arabia and Russia The