Govt to slash fuel prices?

The anticipated relief will come in the wake of what has variously been described as 'tumbling' global oil prices.

The global price of crude oil has dropped from the record US $145 per barrel to US $135.  By yesterday it had reached the $118 per barrel level.

Ministry of Minerals, Energy and Water Resources spokesperson, Doreen Motshegwa, confirmed that 'the prices are going down, especially in the Middle East. As you are aware, we do our fuel price reviews on a monthly basis. Our relevant officers are working on the modalities, and the results will be announced sometime this month.'

South Africa yesterday announced petrol price reduction of 27 cents per litre while diesel decreased by 16 cents per litre. There are suggestions that South Africa will further cut fuel prices by R1 by the end of the month.

Meanwhile, the world will experience a serious oil supply crunch within five to 10 years unless there is a collapse in oil demand. This is the conclusion of a new Chatham House report, The Coming Oil Supply Crunch, which predicts a resulting oil price spike that could exceed $200 a barrel. Investment in new supplies has been and will be inadequate. This is partly due to incentives for international oil companies to return dividends to shareholders rather than reinvest them. It is also a result of the resurgence in 'resource nationalism' and some governments starving their national oil companies of investment funds.

To ward off a potential crisis, the report recommends helping producers manage 'resource curse' issues, welcoming sovereign wealth funds and bringing Organisation of Petroleum Exporting Countries (OPEC) into the International Energy Agency's emergency sharing mechanism. Professor Paul Stevens, the report's author, explains the dynamics of current high prices in comparison with past oil shocks. The report argues that not enough money and expertise were invested in the 1990s to maintain excess capacity to produce crude oil if consumption continues along present trends. History shows us that whenever such excess capacity is run down, the oil price rises sharply.