His prediction that the price of a barrel of crude oil could rise as high as $170 and remain there for some time is not based on guesswork, says independent agricultural economist Johan Willemse. The people who analyse these developments very closely say we will still have to live with the consequences of the United States and Israel’s war with Iran for quite a while.
By Alani Janeke, senior journalist at African Farming and Landbouweekblad
The longer it lasts, the more uncomfortable the situation becomes, says Johan Willemse in his weekly agricultural economic overview. Damage to oil, gas and fertiliser infrastructure is mounting, making the situation increasingly severe.
He notes that the international crude oil price rose earlier this week to about $115 per barrel, before falling back to $105 per barrel.
Sugar Price Also Affected
Who would have thought that the situation would also affect the price of sugar, but that is indeed the case, Willemse says. International sugar prices have risen sharply over the past three weeks. The reason is that Brazil, the world’s largest producer of sugarcane, has allocated more sugarcane to the production of ethanol for biofuel than the usual 50%. This increased biofuel production is helping to counter fuel shortages and higher prices in Brazil.
Willemse says the situation is also affecting the delivery of export fruit and meat, particularly to Arab markets, and this is having an impact on South African exporters.
Also read: Farmers advised to secure fuel stocks ahead of price hikes
Food Prices Will Rise
The increase in fuel prices will eventually affect prices on shop shelves, Willemse says. Transport costs could rise by 20% to 30%, and these increases are likely to be passed on to consumers.
Willemse warns that higher fuel and goods prices may lead to interest rate hikes in the coming months. Some large companies are already considering scenarios where interest rates could rise by 2 to 3 percentage points.
He advises farmers to plan their finances carefully, protect their cash flow, and speak to their financiers early if they expect difficulty in meeting repayments.
Also read: Free State Agriculture warns against diesel price manipulation amid global fuel tensions
Withholding Fuel Is Illegal
Minister of Mineral and Petroleum Resources Gwede Mantashe has warned filling stations that withholding fuel is illegal. During a question-and-answer session in the National Assembly on 25 March, Mantashe made it clear that any deliberate attempt to withhold fuel from the market will not be tolerated. Business Tech reported that Mantashe promised to prosecute those who do so.
His warning comes amid growing concern about the availability of diesel in parts of South Africa, despite repeated assurances from government and the industry that the country is not facing a national fuel shortage.
Mantashe said there is currently no overall shortage of fuel in South Africa, and none is expected.
Fuel station owners contacted by African Farming regarding diesel supply said it was difficult to obtain diesel, but they could already see that more stock was becoming available before the scheduled increase in fuel prices.
Also: Attack on Iran already hits oil prices
