Good news on horizon
THE BENCHMARK Brent crude has dropped below $80 for the first time in four years – and this should spell some good news for fuel prices in time for the festive season. The International Energy Agency has forecast that the combination of the American oil and shale gas boom together with weak demand from Asia and the euro zone will keep the price for Brent crude below $80 a barrel well into the new year.
The price of Brent crude has tumbled 30 percent to below $80 a barrel since mid-June and motorists, airline passengers and manufacturers should all see the benefits. South African motorists have reaped some benefits too, especially in the last two months, in the form of fuel price drops.
The main cloud on the horizon is a meeting of the Opec oil producers in Vienna later this month where some experts expect the Middle East’s biggest producer Saudi Arabia to cut off supplies. But with several of the Opec cartel currently facing political turmoil, oil market experts question whether an agreement could even be reached.
It is thought Saudi Arabia has continued to pump oil at record rates as part of an informal arrangement with the US and other Western governments to keep oil flowing at a time when a widening war is being raged against Islamic State. In the past, conflict in the Middle East generally has led to a run up in the oil price.
The biggest change is the re-emergence of the US as a major oil and gas producer, bordering on self-sufficiency. Ironically, the fall in the oil price could slow that process by making fracking, which can be relatively expensive, less economic over the short term.
Brent crude has fallen for eight weeks in a row – its longest continuing fall for eight years.
In South Africa the decrease in the price of petrol and diesel has brought some relief to deeply indebted consumers, with further drops possible.
On November 5, 95 and 93 octane went down by 45c/l. The petrol price has come down from a yearhigh of R14.16 for 93 unleaded inland in April to the current R12.98. A further drop next month would be marvellous news for Christmas.