by Piet Coetzer

Surge in oil price

Fallout from North West African conflict will hit South Africa

Surge in oil price
Oil.jpg

With the conflict in Mali having spread to Algeria after France’s military intervention in its former colony, countries around the globe, including South Africa, are set to experience some of the fallout. It will come at least in the form of higher prices at fuel pumps. An international surge in the price of crude oil has already started. Predictions are that it will not be over any time soon.

Algeria, a member of the 12-nation Organisation of Petroleum Exporting Countries (OPEC), is one of the world's major crude oil and natural gas exporters. The attack two weeks ago by al Qaeda-linked groups on petroleum facilities at Amenas in Algeria caused jitters in the international oil market.

Two years ago the export of oil from another major supplier in that neck of the global woods, Libya, all but ceased a French-led military intervention in the civil war in that country at the time. Production from there is just starting to come on line again. 

Now it is the Algerian supply-line of the global economy’s “black blood” that is coming under threat and the implications are anything but minor. Algeria exports well above 50% of its 1,2 million barrels per day (bpd) of crude oil plus 52.02 billion cubic metres in natural gas exports. 

On the day of the attack the price of crude for delivery in February started to rise and the next day it rose to as high as $96.04 per barrel before settling back again. But experts widely predict that the price will go to $100 and above in the very near future. 

There already exists a trend for the production of crude oil to decline while consumption keeps on increasing. Global supply lines of crude oil are  already negatively affected by the fact that exports by another major producer, Iran, have fallen to very low levels because of the sanctions imposed against it by the United Sates and other Western countries in response to its nuclear programme. 

American interests

If the figures surrounding oil exports from Mali and the wider region are analysed more closely, an interesting perspective on America’s “back seat” position in the present conflict comes to light.

In 2011 the US imported on average 358 000 barrels of crude per day from Mali. By October last year it had dropped to 186 000 bpd despite domestic consumption having increased. This phenomenon can probably be explained by the fact that US domestic production of crude oil has been on the increase over the last few years and is presently at a 20-year high.

In fact the International Energy Agency (IEA) predicts that within the next seven years the US will replace Saudi Arabia as the world’s biggest producer of crude oil. This implies that the US would now perceive itself as being a lot less vulnerable to imported oil supplies than it has been for many years or even decades.

It is, however, most unlikely that it was only oil, or even a perceived radical Islamist terrorist threat that motivated the French intervention in Mali. As far back as 2003 allegations that Saddam Hussein attempted to acquire so-called “yellowcake” uranium powder from that region formed part of the public motivation for the invasion of Iraq. 

It has since come to light that the allegation was at best bad intelligence if not an outright lie. It is, however, a fact that Mali is Africa’s third largest gold producer and that the exploration for uranium, which often goes hand-in-hand with gold, is in full swing.

Other resources include promising diamond prospects and significant iron ore, bauxite and manganese deposits. To this can be added copper, marble, gypsum, kaolin and phosphate.

Little wonder that many analysts and commentators interpret Western military interventions, starting with Libya two years ago, as little more than a second scramble for Africa.

 

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