Home FleetWatch 2019 The oil price – which way is it heading?

The oil price – which way is it heading?

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The present moratorium on the use of High Cube containers ends on December 31st this year and the lack of action in terms of the way forward poses a massive risk to our hard won international agricultural produce and perishable product export markets - and many other sectors.
The present moratorium on the use of High Cube containers ends on December 31st this year and the lack of action in terms of the way forward poses a massive risk to our hard won international agricultural produce and perishable product export markets - and many other sectors.

At the halfway mark in August, the oil price was hovering between $58 and $61 a barrel – still jittery after the knee-jerk reaction on the first day of August when US President Donald Trump announced there would be an additional 10% tariffs imposed on some US$300-billion of Chinese goods. Following that announcement, the oil price dropped by about 8% in just one day. Not surprising, just a few days later, Trump changed his mind saying the tariffs on about half of the goods would be deferred to mid-December. The way Trump operates, however, anything could happen between the time of writing this and you reading it.

As the month progressed, it became more apparent that there is real concern for an economic slowdown in China – and elsewhere – as the trade war with the US lingers on. It has already been recorded that industrial production in China – an important indicator for the country’s economy – grew by only 4.8% in July compared to the previous year. That’s the worst growth for that sector in 17 years.

The German economy seems to have stalled, the Argentinean Peso crashed dropping about 50%, the Saudi-backed OPEC seem to be holding production while oil and gas inventories in the USA continue to rise. Relating all this – and more – to the local situation, the weak Rand – once again at more than R15 to the US dollar – will inhibit the fuel price going forward. At mid-point in August, the Central Energy Fund indicated that a 15 cpl increase in the diesel wholesale price was likely for September. It could even be larger as we see the Dow Jones slump more than 700 points as US and other investors dump bonds sighting a perceived risk of an economic downturn.

While on the subject of fuel, the big question we need to ask is: “When will the National Department of Energy take real steps to finalise and implement a sensible and sustainable energy strategy to secure the future availability of quality clean fuels at a stable and more affordable price?”

Still to be finalised is the decision on whether to improve and increase the country’s refining capabilities or take steps to import good quality refined fuels. Widespread access to cleaner low sulphur fuels should, by now, be a reality. Vehicle manufacturers are waiting in eager anticipation to introduce more fuel-efficient and environmental friendly vehicles. There are numerous smaller, less populated and far less economically advanced countries than South Africa that implemented 10ppm petrol and diesel several years ago. Apart from the cost of our out-dated fuel, we now also pay more for carbon emissions. Could the delay be because of “those who don’t know what they are doing or maybe it is those who don’t know what they are doing but don’t know they don’t know?” – With acknowledgements to J K Galbraith.

The present moratorium on the use of High Cube containers ends on December 31st this year and the lack of action in terms of the way forward poses a massive risk to our hard won international agricultural produce and perishable product export markets - and many other sectors.
The present moratorium on the use of High Cube containers ends on December 31st this year and the lack of action in terms of the way forward poses a massive risk to our hard won international agricultural produce and perishable product export markets – and many other sectors.

Transport, the Blind Spot?
While our minds are still on government and them not doing what they say they will do, we can only shake our heads in trying to figure out why it is that our national government, by the protracted finalisation and implementation of various traffic and transportation regulations, just cannot make an end. All we see are Draft Bills, amendments of amendments and lengthy periods of public comment.

Could this unacceptable situation be flowing from the on-going rotation of sitting transport ministers every two to three years – nine since 1994? Could it be that each transport minister did not possess any prior knowledge or experience of this important ministry? The efficient, free-flow of our transport services (all modes), accounts for a measurable percentage of our GDP as it refers to exports, especially agricultural and food exports. The sector also employs several hundred thousand people. Currently the industry – and indeed the country as a whole – waits for the DOT to finalise, implement and enforce a virtual laundry list of draft and/or amended regulations. Examples include:

High Cube Containers
The working group of experienced experts appointed to review and assess the merits of transporting these containers with a maximum height of 4, 6 metres still awaits the acceptance of and implementing a contract to undertake this task. Apart from the fact that the lack of action poses a risk to the success of our hard won international agricultural produce and perishable product export markets, there is a warning from the leading shippers that there is likely to be a shortage of containers in 2020 and beyond due to the shortage of reefer ships.

Should South African exporters fail to maintain the use of these preferred boxes, we are risk of losing lose several billion Rands which our economy so desperately needs, not to mention the loss of jobs on farms and at pack houses. The present moratorium ends on December 31st this year. There is a meeting scheduled for some time in September when the working group along with the DOT DGs should find grounds for agreement to allow all necessary arrangements to be put in place to ensure there will be no interruptions in the flow of our exports.

Another important draft regulation residing somewhere in the DOT is the National Road Traffic Law Enforcement Code (NRTLEC) in which we find the Transport Legislation Enforcement Code. The presentation of this Bill at the recent Transport Legislation Annual Workshops highlighted the planned steps to be taken to ensure appropriate selection and training of traffic and transport law enforcement officers. Proper data collection, analysis and evaluation of traffic accidents with the objective to upgrade and improve our national road safety strategy are to be implemented. Surely, this should be addressed with some urgency?

On the wider front, another concern that needs to be addressed is the on-going congestion, delays and go slow protests at the South African ports. The time for talking is long past. Next thing we will be facing on-going losses as exports and imports move to other ports in Namibia, Mozambique and further afield.

All this reminds me of what the Pope said to Michelangelo when he was painting the ceiling in the Sistine Chapel: “When will you make an end?

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