SA’s cost of living set to rise after attacks on Saudi oil fields
We have no cushion against petroleum price increases or shortages
I ATTENDED a delightful kiddie concert at my grandson’s school that is celebrating its golden jubilee.
It was a happy, memorable, musical, foot-tapping event in which every child in the school participated, and in which clever audiovisual presentations reminded the audience of global and local developments during the school’s 50-year history – moon landings, South Africa’s democratic developments, Rugby World Cup victories, Barack Obama being sworn in as US president, Madiba’s passing, and more.
African rhythm, Cape songs and rock ‘n’ roll thundered across the hall as the youngsters danced their way into our hearts with a well-choreographed, lively and colourful concert.
As the school has transformed in those five decades, I had hoped to recount today some of South Africa’s transforming maritime events and achievements over the last 50 years.
But then came frightful Hadean footage of Saudi oil installations ablaze, followed by blame apportionment to various parties for those attacks by drones – or possibly by cruise missiles.
Curiously, initial television news broadcasts brushed aside the devastation, relegating its importance behind accounts of Brexit, Donald Trump’s tweets, and even the former Welsh rugby captain’s announcement that he is HIV-positive.
But the destruction of 5% of the world’s oil production capacity has since been portrayed as a mind-blowing catastrophe in terms of its consequences for world oil supplies, global oil prices and the maritime industry, and even in terms of the threat of a major war. And those attacks – I counted six different fires raging at Abqaiq alone – confirmed the fearsome power and stealth of modern weapons. Sophisticated Saudi, Israeli or US defence systems seemed not to have tracked the inward flight of the world’s latest weapons of mass destruction – drones – that can be launched from a simple piece of commonage.
Fears of shortages caused the oil price to spike rapidly, reportedly the greatest rise since the invasion of Iraq of 2003. Although the immediate rise in price was ameliorated partly by some leading countries pledging to release their reserve stocks if shortages persisted, the inevitable knock-on effect will be seen here soon in increased petrol and diesel prices, affecting in turn the cost of everything from food to clothing and even steel.
While shoreside installations are endangered by these aerial atrocities, tankers in the Gulf – or any ships for that matter – could also be fair game for similar attacks, spawning the thought of the ghastly fate of crew members aboard any ships under attack. Cast into the water or trapped aboard in a furnace of burning oil, those innocent seafarers – someone’s father, son or brother (or mother, daughter or sister) – will suffer horrific deaths.
Following the oil price rise, global increases in ships’ bunker prices will add to the shipping costs of cargoes, while war-risk insurance surcharges imposed on ships trading to the Gulf region will be passed on to shippers of cargo emanating from or going to the Gulf region.
And that could include surcharges on any ship steaming within quite a wide radius from the coast of Yemen, one of the alleged launching sites of the weapons that caused such destruction in Saudi Arabia.
Since the United Arab Emirates is allied to Saudi Arabia in the war against the Houthis in Yemen, and given the destructive power of drones or missiles, fears have been expressed about the safety of the high-rise buildings in Dubai and similar centres of opulence.
As the world has relied too much on Middle Eastern oil reserves, perhaps the weekend’s attack should cause countries to move their oil and gas supply lines away from the turbulent Gulf region.
South Africa, for example, could turn to west African oilfields for more of its energy imports, and should also hasten prospecting for oil and gas off its own coast. To this end, important and long-awaited news last week outlined the structure of the state’s share that would apply to oil and gas prospecting and production within our economic exclusion zone.
At least companies involved in the local offshore oil and gas industry now know where they stand and can take decisions accordingly.
But South Africa has no cushion against oil price rises or against sudden supply shortages. Little follow-up has been reported concerning the sale a few years ago of much of our strategic oil reserves, syphoned off at a very low price and leaving the country to restock its tank farms at a much higher price. That smacked of shady dealings!
To counter the country’s vulnerability to oil shortages and price hikes, current liquefied petroleum gas (LPG) importing projects at Richards Bay and Saldanha Bay – as well as oil-blending facilities at the latter – are steps in the right direction. Additional stockpiling tanks are essential, particularly as the Middle East teeters so often on the brink of conflagration.
“We are the world, we are the children,” sang those smiling faces last Saturday. Hopefully, the Gulf region’s youngsters can share that optimism.
Ingpen is a teacher at Lawhill Maritime Centre. Email brian@capeports.co.za