Repo rate down - Petrol price up!

[Genesis]

Is it just my imagination, or does the petrol price go up everytime the repo rate comes down.

 

SOME THINGS JUST DONT MAKE SENSE TO ME!!

 

Another 16c per litre hike.

 

What we win on the merry-go-round, we lose on the round-a-bout.

 

Oh well, I guess thats economics, and I know $%i# about economics.

[Slowbee]

and while you ponder the meaning of the number 42, are you going to join us for a night ride in the forest ?

 

 

 

[wisecrack]

It's the zuma and malema machine hard @ work wtf are you complaining about???

[Tumbleweed]

Oh well' date=' I guess thats economics, and I know $%i# about economics.

[/quote']

 

 

 

only two people in the world understand economics...and they disagree.

[rory21]

I'm sure you saving more on your bond repayments than the extra you'll spend on petrol?

[Rocket-Boy]

the bond repayments are a relief but the petrol price isnt. Sure im still savign more at the end of the day but not everyone is, some people dont have bonds.

I think the government still makes more at the end of the day this way. Looks like somone is going to make their bonus.

[splat]

Lets not forget the electricity price increase!

That will affect the cost of pretty much everything else.

There goes the savings you might make on your bond and car...

 

(Best I have some more coffee and cheer up - Its Monday after all )

[Wazza]

Oil is at $65 / barrel.

[Tumbleweed]

it's been revised to 17c.

[Slave]

Is it just my imagination' date=' or does the petrol price go up everytime the repo rate comes down.

 

SOME THINGS JUST DONT MAKE SENSE TO ME!!

 

Another 16c per litre hike.

 

What we win on the merry-go-round, we lose on the round-a-bout.

 

Oh well, I guess thats economics, and I know $%i# about economics.

[/quote']

 

If you watch the news, you will get a good indication as to which way stuff is likely to go with a simple basic understanding. ('k so the are a lot of other factors but this is usually a good guideline.)

 

Capitalism works on supply and demand. The more demand there is, the higher the price you're likely to pay.

 

Currently 80% of the worlds oil is being supplied by 20% of the oil reserves, mainly Russia, the US and Britain (North Sea or Brent), not necessarily in that order.)

 

There is a high demand for oil and OPEC are controlling the price by lmiting supply.

 

As demand goes down, so the price of Brent crude goes down. Higher crude prices, higher petrol / diesel pump prices.

 

Since SA imports all of it's crude, the price is also goverend by the Rand Dollar exchange rate. (Sasol makes fuel from coal and takes it's pricing from ineternational markets. So there is a good probability that we a re being ripped off here.)

 

And then there are RAF levies and taxes on our fuel that the goverment makes millions out of (and once again you are ripped off.)

 

It is unfair to say that lower interest rates ead to higher fuel pricies, but look at it this way, low interest rattes mean more dispasable income. Leads to growing economies (over time) and higher demand for fuel. So higher prices.

 

Only way we can bring the price of fuel down is to boycot the stuff and go green. All buy bikes (and get ripped on the price of those). Find more efficient and environmentally friendly ways of doing commerce and business, keep the planet healthy and put the oil industry out of business,

 

Looking at the price of crude, it stabilised around 50 dollars a barrel. It's now over 60. Result, increase the pump price of petrol. Net result, we are more likely to travel less.

 

Is that altogether a bad thing? I think not. We are currently killing ourselves and our planet with greenhouse gasses and carbon emmisions. Likemaking elctricity from coal.

 

Why did they not build more hydro electric plants way back? Ijits.

 

Lots of factors but simple basics. Understand the basics and everything becomes a bit more logical or easier to understand.

 

 

[Vuilgoed]

Interesting analysis Slave. As you said, a little symplistic, but still theoretically sound.

 

I don't quite understand why we have been seeing such a steady upward trend in the oil price. Generally this happens leading into the US and European winters, not this time of year. This could be an indication that some of the bigger users such as manufacturing concerns and mines have begun increasing usage volumes again, which could mean that at least some sectors are beginning to recover. Could the oil price be a barometer indicating that the global recession has hit bottom? I sure hope so!

[Slave]

I guess it is pretty much the barometer of economic cyclesstarting to turn the corner.

 

However, I'm not convinced though because GM are filing for chapter 11 (Bankrupcy). Unless the market has already discounted this, I think a large correection in the Dow and then the JSE is likely. Just how long this will take to recover is unknown. But then again, GM have been deep in t for a looong time now. I'm talking years.

 

A lot of demand came out of China recently and their GDp had been double digit for some time. (Funny how an economy can perform when the labour cost is low. Perhaps the Africans need to leran something from this instead of holding the economy to ransom and making unreasonable demands.) Anyway Chinas GDP has come down some, just not sure by how much and it is entirely possible that they and India will lead the way out of world recession with the US only turing the corner sometime next year.

 

In the meantime, Oil demand is up and so are the prices. So we just k2k off again.

[IdeJongh]

 

 

Why did they not build more hydro electric plants way back? Ijits.

 

 

 

Yeah agree overall, but with these hyrdo electric plants, where is SA would you find that amount of water?  Drakenberg is the only place, and that purely large enough for grid regulation.

 

Yes we're reversing millions years of natural CO2 capture, but the entire planets industrial and economic expansion is based on cheap energy.  Yes we must find viable substitutes, but more due to the fact that we're going to run out of fossil fuels long before we notice the impact of climate change.  My 2c.

IdeJongh2009-06-01 06:36:16

[Slave]

idj. even if they had two or three hydro plants, it would reduce a massive amount of coal consumption. That's a lot of greenhiuse gass.

 

Don't kid yourself on the amount of time left before we run out of options to turn off global warming. I believe the problem to be in need of very urgent attention.

 

There is solar and wind energy as well and I see precious little use of that in Africa.

[GoLefty!!]

Interesting topic. lets gets some facts on the table first.

 

Top Ten Oil Exporting Countries

Saudi Arabia (8.73 million barrels per day)

Russia (6.67)

Norway (2.91)

Iran (2.55)

Venezuela (2.36)

United Arab Emirates (2.33)

Kuwait (2.20)

Nigeria (2.19)

Mexico (1.80)

Algeria (1.68)

Top Ten Oil Importing Countries

United States (11.8 million barrels per day)

Japan (5.3)

China (2.9)

Germany (2.5)

South Korea (2.1)

France (2.0)

Italy (1.7)

Spain (1.6)

India (1.5)

Taiwan (1.0)

 

 

Importers create the demand, while exporters supply. Missing from the list of exporters is Canada, but that because the above list deals only with conventional oil supplies. Canada produces syn oil from tar sands washing and pyrolysis.

 

When economies slow down there is a drop in oil demand. YOU can actually use the Diesel consumption figures as a measure of economi growth since other soruces of energy are very small compared to oil.

The US, China are intimately linked.

China buys raw material from the US and otjer natipons and sells it bacck to them as finished goods.

If Production slows in any of it's customers states then it's output will slow in accordance with the shrinkage elsewhere. It's like an economic lung...

 

If economies start to pick up again then the demand will rise (Assuming you are a nett importer of energy (China, USA, Japan, Taiwan, etc...)

So with this incresing demand will there be an increase in price?

 

Production has not slowed to create a nett deficit, so there has been stockpiling of oil. Stockpiling allows a country to create buffer stock for when times are tough and it helps to smooth the effect of volatile oil prices since if the price goes up too high then you simply draw upon your stockpile  to tide you over.

 

Now in SA the ability to Stock pile disappeared once the Strategc Fuel Fund was split into the Central Fuel Fund and a parastatal company. Stockpiles were sold off around 10yrs ago because it was deemed to be a wasted effort to maintain the stockpiles while free abundant oil was on the market for less money.

 

So, sell th stock piles and you have removed the damping oil (see what I did there) from the fuel pricing mechanism and you are now more susceptible to the volatility in the global crude oil price.

Also , we do not pay the advertised Brent Crude price, that is merely an indicative price, we tend to pay a few dollars more  due to low volumes requiring smaller less economical ships to deliver the crude to SA's shores.

 

 

Now the story of SASOL supplying fuel to the SA market....

 

SASOL is a private company and it can produce both petrol and diesel at Secunda  form gas or Coal. It could make avery high quality fuel suitable for the European market for less than Europ can import the crude oil and refine it into similar quality fuel.

So if SASOL can extract a higher price for it's product by selling to Europe, why would it sell it's fuel product to the SA consumer?

the nett effect is that we could end up paying much more for fuel if SASOL supplied the fuel exclusively. Hence a competitive environment is created through the semi regulated environment.

 

 

so important point:

 

1) SA has small stockpiles of fuel therefore we are more susceptible to teh oil price volatility,

 

2) We pay more for our Crude than the indicative Brent Crude price due to the low volume we import.

 

3) having a regulated petrol market is not a bad thing for customers.

 

 

How does this link to the interest rate.....?

 

Well SA is a nett importer of crude oil. We pay for this crude through exporting gold, attracting foreign investment and domestic expenditure on imported goods and services (the margins throgh the value chain creates the money)

the foreign investment part is linked to the interest rates or REPO rate.

In order to attract that investment our economic conditions has to remain attractive to foreigners. So this means Saffa's have to buy stuff but also the foreigners money must mor emoney here than it can elsewhere.

With our higher interest rate and higher infation, SA is attractive for a foreigner to leavetheir money. Damn you only get 1% in an offshore account in Jersey, Gurnse or the Virgin Islands. In a SA bank you get 7%. Thats shhhhweeeet for our foreigners.

 

So as the poil proice goes up, our account deficit goes up and we need keep stimulating the economy so that there is a turnover of goods and services. If that grinds to a halt then the higher interest rate won;t help because theres nothing to support the economy. Sort of like you losing your job but you still have to pay the bank who will take their assett away from you unless you continue paying.

 

Of course thats how it's working at the moment. It's not necessarily always this way. All depends on the given circumstances.

[IdeJongh]

Slave, no you need a lot of hyrdo plants to make a dent.  One is not making a dent, it doesnt even provide electricity to the grid, only controls peaking, why would two or three??

Yes solar and wind is AN answer but as what cost, hence my comment regarding cheap energy.  Why was the US, UK, China etc allowed to build there empires on cheap energy but struggling africa now has to do so on far less affordable means?

 

As for global warming...dont believe everything you read in the press, there is much more going on behind the scenes.