Page 8 - FSUOGM Week 21 2022

FSUOGM COMMENTARY FSUOGM

From Durban, jet fuel must be piped to Natref defence of producers.
for inspection before it can be used by airlines, a As he has done repeatedly with reference to
process that takes weeks. upstream investment, the minister said on May
It is also expensive. Industry observers esti- 9 that underinvestment in global refining capac-
mate that the refinery closures could see South ity was to blame for fuel supply shortages and
Africa’s petroleum product import bill soar by high prices.
as much as 300%, presenting a clear challenge to “All mobility fuels have skyrocketed ... and
the extension of the fuel tax break. In the mean- the gap between crude prices and these products
time, there is further price pain for consumers in some cases is actually 60%,” he said.
ahead, as the ZAR1.5 ($0.09) per litre tax holiday “The facilities that can convert oil into usea-
is due to expire this month. ble products have shrunk and ... are sh`rinking.
Drivers are now set to see gasoline and diesel So, is it an issue of crude availability? The answer
prices rise by 16% and 14% respectively within is ‘no,’” he told attendees at an industry event in
inland areas and 17% and 15% respectively Bahrain.
along the coast. Highlighting a 650% increase in refining
Elsewhere in Africa, Nigeria’s national oil margins compared to the five-year average
company (NOC) is still implementing a major between March 2021 and today, he said this
overhaul programme covering four state- clearly shows that “there is no refining capacity
owned oil refineries, all of which have been idle commensurate with the current demand and the
for some time. However, the privately owned expectation of demand this summer.”
Dangote Refinery, which will have a capacity of As if to hammer home his point, Prince
650,000 bpd, is due to begin operations later this Abdulaziz then called for “people to reconsider
year, giving Abuja hope for the future. what they are doing with their taxing if they are
Inexplicably, though, rather than leveraging complaining about crude prices and refined
the little modular refining capacity the country product prices.”
does have, Nigerian National Petroleum Co. Ltd
(NNPC Ltd) has been exporting its full crude North America
slate. This has forced private refiners to make a But complaints about prices have certainly
choice between sourcing crude from elsewhere flowed freely in the US. Both diesel and gasoline
or shutting up shop. prices have continued to hit new record highs in
Meanwhile, Abuja has lately been forced to that country.
introduce three months of subsidies for jet fuel This is partly because the war in Ukraine
amid threats by airlines to ground domestic has disrupted global flows of crude and refined
flights, and such measures are likely to continue products. US President Joe Biden has attempted
at least until the refining work is complete. to ease the pressure on fuel prices by releasing
These problems are not confined to Africa’s large volumes of crude from the country’s Stra-
larger economies, though. Senegalese flights tegic Petroleum Reserve (SPR), but to limited
to Paris have routinely been forced to make effect.
fuel stops in the Canary Islands of late, and the Refiners are still struggling to keep up with
country’s largest airport has been requesting that demand, and the fact that US refining capacity,
incoming flights take measures to ensure they at 18.1mn bpd, has dropped to its lowest level
carry enough fuel for the return flight. since 2015 is not helping. EIA data show that
diesel inventories on the US East Coast have
Middle East fallen considerably below typical levels.
While Dakar has blamed “unfavourable inter- But there are other factors at work too. For
national conditions,” the oil industry’s de facto the US, these developments represent a contin-
kingpin, Saudi Arabia’s Energy Minister Prince uation of dynamics that emerged because of the
Abdulaziz bin Salman Al Saud, has come to the coronavirus (COVID-19) pandemic.

Crude oil prices are only one component of product prices at the pump (Saudi Arabia Ministry of Energy)

P8 www. NEWSBASE .com Week 21 25•May•2022