The heavy price of Crude Oil

Gasworks in Braamfontein, Joburg

As I write on this blog, the international price of crude oil has soared to US$119 per barrel. This is the highest price of the commodity since it hit a high of US$147 per barrel in September of 2008 during the global financial crisis. This time around, the cause of the high price of crude oil is of course the protests in Middle East, especially those in Libya, one of the world's biggest supplier of the raw material for petrol and diesel. The protests in Libya have obviously placed huge restrictions on crude oil production in that country, which in turn has caused a decrease in overall global supply of this prized raw material. With the global consumption of crude oil-related products on the increase, the dip in the supply of crude oil could only serve to drive the price of refined products higher than than they already are.

As a direct result of the hike in crude oil prices, in the next few days South African will be paying just under R10 per litre for petrol. This is the highest price ever seen at South African fuel pumps and this is bound to have a negative effect on all areas of the economy. It must be borne in mind that South Africa does not have crude oil reserves and as such the country imports a significant portion of its petrol and diesel requirements. SASOL's coal-to-liquid (CTL) technology provides small but much needed protection and relief against the high crude oil prices. 

I can only wish that the crisis in Libya is resolved soon rather than later so that the price of crude oil  could normalize, lest we see our economy crippled and brought to a stand-still.