South Africa is still tapping oil stockpile to fund fuel subsidy

South Africa is still selling oil from strategic stockpiles to fund measures introduced two years ago to cushion consumers from a spike in road fuel prices.

The Strategic Fuel Fund Association paid the National Treasury R2-billion in proceeds from the sale of oil inventories for the financial year through March, the Central Energy Fund said in a response to questions. In 2022, authorities made reductions to fuel levies to help protect consumers and businesses against the impact of rising crude prices.

“The current disposal process has not been concluded,” the CEF said, declining to identify who bought the oil. It said a current sales tender “is handled through a transparent, competitive and cost effective public process.”

The SFF in February issued a tender to sell 3.5-million barrels of Iraqi Basrah Light crude. It said offers had to be for the full amount of the oil that was first purchased by the SFF in 2006, and which had been stored with small quantities of different grades.

The SFF told lawmakers last week that during the recent financial year there had been weak demand for oil storage at the giant Saldanha Bay terminal, due to backwardation in the futures market — a condition that makes it less appealing to store crude. A lack of interest, or “none worth mentioning,” remains to date, the CEF said.