Rising tanker costs add to SA’s fuel import bill - TimesLIVE
South Africa’s growing reliance on imported fuel is exposing the country to another source of cost pressure as oil tanker freight rates surge amid disruption to shipping routes in and around the Middle East.
According to London-based energy intelligence firm Argus Media, freight has become a much larger component of the cost of getting oil to market, with charges now accounting for about a fifth of the cost of delivering crude to refineries.
Head of oil market analysis Tom Reed said freight rates had surged particularly sharply on routes carrying crude from the Middle East to Asia, as geopolitical disruption forced ships to take longer and riskier journeys and increased competition for available tankers.
South Africa is a net importer of petroleum products, and shipping costs form part of the international costs used to calculate domestic fuel prices. The department of mineral & petroleum resources cited higher shipping costs among the factors behind the increase in international crude prices during the latest fuel-pricing period.
Tanker freight costs on the benchmark Middle East to China route reached record levels in September, with the cost of shipping crude on the route rising to about $1.2m (R19.5m) a day for a very large crude carrier, according to Reed.
The increase comes as attacks and disruption around the Strait of Hormuz, the Red Sea and Bab el-Mandeb have altered established oil-trading routes.
Saudi Arabia’s East-West pipeline, which carries crude oil to the Red Sea, was also disrupted following an attack this month, forcing the kingdom to increase exports through its eastern Gulf terminals and increasing the amount of crude moving through the Strait of Hormuz.
Reed said Saudi Aramco was expected to send at least 56-million barrels of crude through the Strait of Hormuz during September and October, increasing reliance on the waterway despite heightened security concerns. “The cost of insuring tankers against war-related risks has also risen sharply, adding to the cost of transporting crude.”
The higher costs are not confined to Gulf crude, with elevated tanker rates now affecting other major oil-trading routes, Reed said.
A recent analysis by the South African Reserve Bank estimated that the country’s oil import bill could have been R76bn lower between 2021 and 2024 if the share of imported refined petroleum products had remained at about 25%, as it was during 2010–19.
Higher freight costs add to the cost of imported fuel, even when the underlying oil price is unchanged.
The Reserve Bank this week raised the repo rate by 25 basis points to 7.25% after it raised its near-term inflation forecasts, mainly because of higher fuel prices. The Bank said headline inflation will likely be above 5% later this year and early next year, before slowing as the fuel shock recedes.
