South Africa’s fuel reserves are “safe” – but there’s a R3.4 billion catch
The Central Energy Fund has defended the sale of South Africa’s entire oil reserve, saying that the country’s fuel security hasn’t been compromised as the government still has access to reserves.
BDLive revealed on Thursday that the department of energy had sold 10 million barrels of South African oil reserves, leaving the country with only 300,000 barrels in stock – enough for less than a day, if an emergency situation arose.
The Democratic Alliance pointed out that the stock was sold in December at a price of $28 a barrel, totalling almost R5 billion. The party lambasted government’s “negligent” decision, in light of the oil price hitting over $50 this week.
The State Fuel Fund said that the sale was a “rotation” of old stock, and was something that had happened in the past, and didn’t need permission from Treasury.
The group spun the news that it had left the country vulnerable through the sale by saying that – actually – it had strengthened the country’s strategic oil stocks by getting first right of refusal from the buyer, in the event of a crisis.
This means that the country now has access to a larger quantity of crude oil than it originally sold.
The catch, however, is that the country would have to buy the fuel back, and at current prices, would make a big loss – about R3.4 billion, according to BDLive.
On Friday, fuel prices once again pulled below $50 a barrel as investors worried higher prices could reactivate shuttered crude output, adding to global oversupply.
Brent crude fell 36 US cents to $49.23, retreating further from the previous session’s $50.51 peak. US crude dropped 35 US cents to $49.13 a barrel after touching $50.21 on Thursday.
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