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South Africa: Oil Price Trend Still Upwards
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Business Day (Johannesburg)
7 May 2008
Posted to the web 7 May 2008
Renée Bonorchis
Johannesburg
JUST as SA prepared to stomach the latest increases in petrol prices, the cost of a barrel of oil hit new peaks yesterday, with Brent crude gaining more than 3% to touch $119 a barrel.
The swift gain in oil prices was blamed on factors ranging from supply fears in Nigeria and Iran to heightened demand for oil in the US.
Royal Dutch Shell was the company worst affected by recent attacks in the Niger Delta. Its supply line has been forced to cut back by about 164000 barrels a day. Exxon's production capacity in Nigeria has also been affected. While this is not enough to cause oil shortages around the world, concerns about supply were heightened yesterday when Iran said it would reject any incentives from western governments that would block its pursuit of nuclear technology, Reuters reported. Renewed clashes between Turkey and Kurdish rebels in northern Iraq also lent support to oil prices.
As for the US, a report on Monday showed service industries in that country had expanded in April - this news pointed to the fact that energy use was on the increase. Further, with the northern summer on its way, Americans are soon expected to fill their tanks more often as they go on driving holidays.
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While the US driving season is unavoidable, Reuters reported late yesterday that militants in Nigeria would agree to a cease-fire if former US president Jimmy Carter agreed to act as a mediator. However, there was no confirmation from Carter's camp that this would take place.
SA was not the only country groaning under the weight of petrol price increases yesterday - Egypt's parliament hiked the price of petrol 35% on Monday to raise money to pay its public servants more.
As the oil price climbed yesterday, so did the prices of other commodities and this kept the JSE all share index mostly in the green. But as Cees Bruggemans, chief economist at First National Bank, wrote yesterday, resources strength is cold comfort to households deeply in debt acquired when interest rates were significantly lower. He said the global commodity price shock still seemed to be gaining intensity.
Subsidise diesel(I do not have a diesel car)to the utmost extent,no to, little to late !
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