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Consumers 'won't benefit from oil deal'

By unknown | Sep 10, 2008 | COMMENTS [ 0 ]

Eric Naki

Eric Naki

The South African consumer will not benefit at all from the oil deal between the country and Venezuela as long as the fuel price is determined on the international market.

This is the view of Econometrix senior economist Tony Twine, who was reacting to the agreement signed by President Thabo Mbeki and his Venezuelan counterpart Hugo Chavez last week, in which Venezuela will sell oil directly to South Africa.

"If the existing regulation of fuel prices remains in place, the Venezuelan arrangement will have no impact at all on consumers. Our prices are based on the accumulation of benchmark refined fuel prices in the Mediterranean, the Gulf and Singapore, plus onshore costs, margins and taxes. None of these will change because of the Venezuelan resource," said Twine.

If prices were completely deregulated in future, then there may be some effect on the petrol price in the country.

Asked if the deal would have an impact on the economy in general, especially on goods and food prices, Twine said the impact would be absolutely zero, unless the Venezuelans became intensely charitable.

He said the deal would not influence the price of food at either the delivery door of supermarkets and certainly not at the till.

He said that even removing the middle man in the sale would not result in lower oil prices as the margin extracted by oil traders was minimal.

"PetroSA will simply be taking over the jobs normally done by the traders, and is likely to want to absorb most of that margin for its troubles," said Twine.

The most likely beneficiary would be PetroSA, as it may be able to extract some margin from crude oil and natural gas from their Venezuelan production, which may be fractionally cheaper than other sources.

"There's no guarantee they will pass this margin on to South Africa and their shareholders might be very angry if they did."


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