Oil refinery attack already influencing SA fuel prices

Drone strikes on Saudi Arabia’s Abqaiq oil refinery have wrought chaos on world oil markets and made the forecasting of the oil price more difficult. This is according to the Automobile Association (AA), which was commenting on unaudited mid-month fuel price data released by the Central Energy Fund.

“The refinery strike was a game-changer for the way oil price stability is viewed.

“At a single stroke, 5%-7% of the world’s oil output has been wiped from the board, leading oil prices to surge disproportionately,” says the AA.

This has begun to feed into the SA fuel price picture.

Diesel, already set for an increase by last Friday, has swung further into the red, with an increase of 13c/l forecast. Illuminating paraffin has followed suit, with an 8c rise on the cards. All grades of petrol were showing a decrease last Friday, but this has narrowed, from 11c to 5c in the case of 95 octane, and 25c to 20c for 93 octane.

The AA says that because of the volatility of the factors that influence the local fuel price, movements are likely and the outlook will change before month end.

“The US president has authorised the release of oil from that country’s strategic petroleum reserve. This should calm some oil price nerves, but the potential for copycat attacks on other oil installations now that their vulnerability is clear remains a concern,” says the AA.

The association notes that SA’s heavy reliance on petroleum imports is worrying. In an era where many millions of barrels of production capacity could be removed in an instant, the country cannot ignore the risk of fuel shortages or crippling price increases that are disconnected from normal supply-and-demand cycles.

“We believe government should review short-term risk mitigations, including increased biofuel production, electric vehicles and better public transport. Given the recent developments, these mitigations should now become urgent priorities for government,” the AA concludes.