Daily Dispatch

Oil price rising not entertaining

UNDER the current government it would be fair to say our politics has degenerated into a blood sport. Our politicians are accorded celebrity status on the basis of their charisma and their perceived ability to exercise favour. And we watch them with the same kind of fascination that the Romans watched their gladiators of old. The more sensational the behaviour, the more they command our attention. Neither policy position nor clean character matters much – it’s all about the thrill and the heat of the moment. And of course, the money pot at the end.

The happy thought for those hungry for this kind of entertainment is that the source has far from dried up. To the contrary. Political analysts predict that the abundant supplies of 2016 will be surpassed in 2017. In fact, the run up to the ANC’s elective conference in December is likely to deliver an endless banquet of scandal.

But the problem with being fed this kind of mesmerising high-drama diet is that pretty much everything else fails to satisfy in comparison. Developments that are of vital importance but which are devoid of theatrics tend to be overlooked.

One such example occurred last week. South Africans fixating on whether President Jacob Zuma would reshuffle the cabinet or apply for a review of the State of Capture report may easily have missed the Opec meeting in Vienna. If not, then found it bone-dry in terms of appeal.

And certainly it may have seemed boring against our unique local standards. But the outcome will nevertheless be so far-reaching that not even those on the spectator seats in South Africa’s political arena will be left untouched.

In a nutshell, Russia joined the oil cartel Opec in a formal agreement to cut outputs in order to push up the price of crude oil.

Which is exactly what has happened. Even prior to the meeting prices rocketed by 7% and have continue to rise ever since. Last Wednesday Brent crude added another 2.09%, rising to $52.49 a barrel. Yesterday prices varied from $54.54 to $56-plus for North Sea Brent crude. The pundits predict it could go as high as $60, but not even that ceiling is a certainty.

Interestingly the biggest winners in this month’s Opec deal – the first struck since 2001 – will be Russia and Iran, both to enjoy higher output and higher prices. Last week analysts said the Russian government’s revenue would receive a $15-billion boost if prices stabilised at $55 a barrel.

Unfortunately no such boost is on the cards for South Africa. We import around 64% of our crude oil needs. The Opec agreement is therefore, disastrous.

And this is not simply because the price of fuel is likely to fly up, but also because our currency is depreciating so rapidly. This is why, while the rest of the world enjoyed the respite of a lower oil price, South Africans barely noticed it.

This is something deserving of serious contemplation, not only by the gladiators inside the ANC’s succession arena, but by all of those on the spectator seats.