Local fuel costs on the rise |11 October 2023

● A consequence of surging global oil prices

Oil prices have been increasing gradually over the past months and continues on this trend as markets reacted to the production cuts pronounced by OPEC, the Russian ban on fuel exports and this week the surprise attack on Israel by the militant group Hamas.

Throughout 2023, oil prices have gone up by 20% with future prices for Brent crude oil nearly hitting US $95 last week.

Both Saudi Arabia and Russia have stated that they were continuing voluntary oil cuts to year end as tightening supply and rising demand support higher oil prices. OPEC Plus, which comprises the countries of OPEC and leading allies including Russia, has been cutting output since last year in what it says is pre-emptive action to maintain market stability.

The recent Israel conflict will also most likely cause a ripple in the oil market and although Israel does not produce oil, concerns are growing that the conflict could exacerbate uncertainty in the region and affect the major producers inclusive of Iran and Saudi Arabia. There could be further sanctions for Iran if it emerges that it aided Hamas in the attack. The conflict may also derail a deal normalising relations between Israel and Saudi Arabia that reports had suggested could have led to the latter increasing its oil output. The geopolitical landscape in the world’s most important oil-exporting region, the Middle East, is yet another severe blow to the market as there were timid signs a week ago that prices could fall.

“During the third week of September, the price of crude oil topped US $95 a barrel but slowed down at the end of the month,” Seychelles Petroleum Company (Seypec) chief executive (CEO) Sarah Romain told Seychelles NATION. “This was only a very short period of relief as the various tensions around the world coupled with production cuts by exporting countries and a drop in the US inventory levels brought back the prices to a high. The Chinese manufacturing activity recovery is also putting pressure on the demand side, thereby pushing oil prices up.”

All oil-importing countries are reviewing their retail prices with high margin increases. Neighbouring countries in the Indian Ocean region, such as Mayotte, Reunion, and Mauritius, have been compelled to raise market prices or, where feasible, provide subsidies in response to the heightened oil prices.

In Seychelles, prices were relatively stable since May when prices of motor gasoline and gasoil never crossed the R21 level up until September. This stability was the result of both a less volatile world market and a day-to-day effective management of imports and storage in Seychelles. But the situation deteriorated by mid-September when a first wave of increases was inevitable and this week again Seypec was forced to review its price tags for the second timein less than one month with motor gasoline hitting R22.58 and gasoil at R23.05

“We all know we are most vulnerable to the extreme volatility of the international oil prices as our importing country status puts us at the mercy of the market,” CEO Romain explained. “But we strive very hard to keep the increases as low as possible. We do so though our very efficient import protocol with our supplier searching for best opportunities for purchase, and we manage our stocks in our local tanks with utmost care and diligence. But at the end of the day, we are compelled to review the prices in line with the oil prices on the international market.”

Seypec’s firm commitment in negotiating its prices with the oil supplier TOTAL Energy is evident when comparing motor gasoline prices regionally which show that Seychelles has the second lowest price at the pumps.

Oil analysts predict some more turmoil on the world market in the coming weeks with tension escalating in the Middle East and with the Ukraine-Russia conflict lingering. The prospects of a stable market are more and more distant with the end of the year around the corner and a fierce winter looming in the northern hemisphere.