Explained: Why SA shouldn't outright sell its strategic oil reserves with other options on the table

South Africa plans to sell a portion of its strategic petroleum reserve to plug a R6bn hole created by recent interventions aimed at easing the pain for motorists at the pump. How wise is this and what are the options?In a wide-ranging interview with global energy market experts Justus van der Spuy and Enrico Ganter of UK-based Capital Energy Resources Limited, the South African government's recent announcement to sell a portion of its strategic crude oil reserves is in focus.At the end of March 2022, Finance Minister Enoch Godongwana said the state planned to use the sale to cover a R6bn shortfall to the fiscus caused by the government's cushioning of price increases at the pump. This was achieved by slashing the general fuel levy by R1.50 per litre for April and May. There are different ways to go about the sale of the strategic reserves.Which way does it appear South Africa is leaning and what other options should be considered?"It is not unusual that in these times of extraordinarily high prices, as well as a healthy element of physical disruption of crude oil supplies and refined products mainly from Russia, that governments worldwide are deploying strategic petroleum reserves to minimise the pain," says Van der Spuy.He explains that if the government was to simply net sell the oil there would be an increased vulnerability to future supply disruptions. South Africa also has a relatively low emergency reserve stock level, believed to be about 10 million barrels. South Africa is a roughly one million barrel per day market meaning we have about 10 day's worth of imports, well below the 90-day commitment advocated by the International Energy Agency."Oil and geopolitics are first cousins," explains Van der Spuy. With the war between Ukraine and Russia entering its third month, global energy prices continue to soar with adverse economic impacts on inflation, job creation, and growth.Gunter says the government's attempts to mitigate the impact of rising fuel prices, compounded not only by the continued conflict in Eastern Europe but by a weakening rand, should be applauded but are simply not sustainable. Learn more about your ad choices. Visit megaphone.fm/adchoices