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Fossil fuel supply is a major area of concern to most developing countries as it is seen as having the potential to become an engine for economic growth.
With the globalisation of world markets emerging as one of the greatest challenges facing developing countries in recent years, and in the face of marginalisation through unfair competition, access to cheaper fossil fuels may help improve the economies of most of the 14 SADC countries. Although Angola, a member of SADC, has rich oil reserves, most countries in the region have to import oil products such as petrol and diesel from other markets, mainly in the Middle East, at higher costs. Petroleum is one of the commodities where African producers such as Angola, Gabon, Libya and Nigeria can be influential in the setting of prices that are favourable to them. From these countries' point of view, the need to keep fuel prices high is crucial in order to achieve substantial profits. According to the South African Institute of International Affairs (SAIIA), Angola supplies about seven percent of the US's oil import requirements. However, mired in a long civil war, the Luanda government has bargained for cash-up-front sales on new oil concessions as a way to fund arms purchases. Despite the high demand for imported petroleum products in southern Africa, the Paris-based International Energy Agency (IEA) says that the average world oil demands are in the doldrums. The agency says that in January, demand was weak in industrialised countries such as Japan, Germany, Italy and the former Soviet Union. "Sluggish demand helped swell stocks in the Organisation for Economic Cooperation and Development (OECD) member countries by about a million barrels per day in January, after a big drawdown in December." The IEA says that the glut has pushed down this year's average price for benchmark brent crude oil by about US$2.50 a barrel below last year's average. This was before the OPEC meeting in Vienna, which was aimed at improving the selling price of oil, up to around US$18.95 per barrel as a result of limiting supply. The OPEC cartel is in control of 55 percent of world oil trade. Through their recent cutbacks on oil supply, petroleum exporting countries are hoping that a seven percent cut in production will restore prices to the $17-$19 level by the third quarter. These are the prices they were familiar with before allowing world supply of oil to outstrip slowing "demand" growth. However, this has not created lower fuel prices in southern Africa except in Mozambique, where fuel prices went down recently. South Africa did not benefit from the low international oil prices due to a sharp depreciation of its local currency against the US dollar last year. In Zimbabwe, fuel prices went up after the country's currency devalued from Z$19.9 to Z$36.5 to US$1 last October. The Zimbabwean government approved an increase of 67 percent in petrol prices last October, prompting riots in the country's major cities. The price of petrol went up by 67 percent while that of diesel was increased by 68 percent. Jet fuel went up by 43 percent while liquid petroleum gas was increased by 25 percent. Despite such a high percentage increase, fuel prices in Zimbabwe are actually lower than in other countries in the region. Petrol in Zimbabwe sold at the lowest price of US$0.27 a litre while Mozambique has the highest at US$0.54. In Botswana petrol sold at US$0.29 per litre, Lesotho US$0.35; Malawi US$0.32; South Africa US$0.41 and Zambia US$0.53 per litre. Recent press reports say Zambians cross the border into Zimbabwe to buy fuel for resale at huge profits in their country. Meanwhile, South Africa's fuel prices are set to rise sharply next month, temporarily placing the brakes on the current downtrend in consumer inflation, economists have said. Like Zambians, some South Africans living near the Zimbabwe border town of Beitbridge cross over to buy fuel. The recent rise in South African fuel prices has been triggered by a steep increase in the international oil price after the OPEC cutbacks. "The petrol price is going to increase by about 17 cents a litre. Diesel and paraffin are also going to rise by about seven cents and 10 cents respectively," economist Mike Schussler told Reuter news agency in South Africa. "That will add about 0.4 of a percentage point to the inflation rate directly. Indirectly, it should double that amount in the next six months which is the time fuel price rises take to work through to inflation," he added. Latest statistics show that South African consumer inflation rose 7.9 percent year-on-year in March, having begun the year at 8.9 percent. Peter Worthington, an economist at JP Morgan, says that inflation would have fallen more steeply in April were it not for the expected increase in petrol prices. In Mozambique, the decrease in fuel prices was not a result of the global trends in oil demand but rather a reflection of the positive economic gains the country has recently experienced. The sharpest cut was in the price of cooking gas, which fell from about US$0.54 to around US$0.38. The price of kerosene fell by 13.1 percent, while that of jet fuel was cut by 11.2 percent. However, the cuts are mainly applicable to the port cities of Maputo, Beira and Nacala. Elsewhere in the country, fuel distributors are allowed to increase the price to cover their transport costs. The Mozambican government reviews fuel prices every month, and alters them whenever there is a significant change in the import price. Economists say the effects of the OPEC Vienna agreement on world oil prices will take time to gauge, but for some parts of southern Africa, higher fuel prices will lift the input costs of road transport companies, with a devastating impact on the poor. (SARDC) |
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