Oil prices slide as world stocks grow

CAPE TOWN – International oil prices tumbled to 45-month lows yesterday as higher than expected US inventory data pointed to growing world oversupply, a situation which analysts said boded well for lower SA petrol prices and inflation.

Benchmark Brent crude fell below the $15 a barrel level yesterday, dipping as low as $14,78, for the first time since April 1994. This reflects a 32% fall since October last year, when the Brent price hit a high of $21,70.

The Dubai price, which is used as the benchmark to determine the in-bond landed cost to determine SA’s basic fuel price, dropped in sympathy to $13,18 from over $19,50 in October.

Prices have remained on a downward trajectory since October, fuelled by weak demand and fears of increasing supply from countries belonging to the Opec oil cartel.

Analysts said while the decline was bad news for crude oil producers, it was likely to have a positive effect on the SA economy and consumers through reduced diesel and petrol prices.

With fuel prices a key component in the consumer price index, where petrol holds a 4,1% weighting, the lower cost of imports would further filter through to the country’s overall inflation rate.

On the corporate side, oil production and exploration company Energy Africa was the only true SA crude producer and was therefore likely to suffer to some extent in a low oil price environment, with Sasol able to count on government protection.

The Energy Africa share was unchanged at R18,50 yesterday, while Sasol gained 35c to R42,25. Sasol had lost 865c or 17% in the three weeks before yesterday.

SBC Warburg analyst Themis Themistocleous said the question was whether the lower prices were sustainable. He believed the Brent crude price was unlikely to go below the $14 a barrel level for any sustained period. “At this price some of the oil fields become uneconomical, and it is inevitable that production levels will fall.”

Reuter reports that yesterday’s renewed price slide was triggered by weekly US statistics showing an unexpectedly large build-up of US crude inventories. The American Petroleum Institute showed a 14,6-million barrel rise in stocks in the week to January 16, putting inventories more than 32-million barrels higher than a year ago.

The big increase in crude inventories added pressure to a market already worried about mild winter weather in the northern hemisphere, rising Opec supplies and weakening Asian demand.

Further pressure came from suggestions that Iraq might be allowed to increase exports under the United Nations oil-for-food exchange.

Johannesburg outsources fleet maintenance

JOHANNESBURG has signed a R2,4bn deal with Super Fleet, the fleet management and maintenance arm of Super Group, to outsource its 6000-vehicle fleet and all its transport operations.

The five-year contract is worth R360m a year, and will run at the same time as a R60m contract to supply the fire department with 104 fire engines for 10 years.

The city’s outsourcing programme is part of a broader plan to overhaul the council’s services to meet the challenges of efficient management.

Super Fleet will provide a full maintenance service, including procurement, licensing, fleet management, insurance and disposal of 6000 vehicles.

This will involve nine departments, including metropolitan police, waste management, water and sanitation, roads and stormwater, parks and recreation, emergency management services, core administration and metropolitan electricity.

Executive chairman Larry Lipschitz said all vehicles would be replaced within two years with the fleet reduced to an optimal level of 4000 vehicles.

The city will benefit from having its vehicle requirements supplied on a 90% availability basis as a result of standardisation, parts preplanning and the fast tracking of repairs.

Super Fleet will employ all 408 council staff members who have been involved in fleet maintenance. Most of these will operate under the management of Super Group’s fleet workshop chain, Power Plus Performance. Four of the city’s workshops have been integrated into Power Plus Performance.

Lipschitz said the contract would benefit a number of Super Group divisions. Power Plus will supply the workshops, Femo the parts, dealerships the vehicles and Super Rent the short-term rentals.

The technology arm of Super Group Logistics will take charge of fuel management, remote engine monitoring and tracking. All vehicles will be managed by Super Fleet’s in-house fleet management software and monitored by their 24-hour call centre in Sandton.

Super Fleet has operated in the fleet management market for the past 10 years and, with 9000 vehicles under its control, is the market leader.

Amid a growing row over the sweeping reform of government the new Commons leader has claimed he will act as a voice for Wales around the Cabinet table.

Peter Hain, who will continue to speak on Welsh matter in the Commons despite the abolition of the Wales Office, insists he can still be regarded as secretary of state.

The controversy came as opposition parties led a fresh assault over the impact of the reshuffle.

The decision to appoint Scottish MP John Reid to the position of health secretary for England and Wales has also come under fire.

In the face of constitutional criticism, both ministers took to the TV studios to defend their appointments.

“I think the politics of this is that people will judge according to whether I can deliver a better health service,” said a defiant Reid.

“When they appointed Sven Goran Eriksson as England manager, there was a huge fuss about it, but actually what people want to know now is has he been a good manager?”
Hain claimed the announcement of videos xxx his appointment could have been handled better by Number 10.

“It was made crystal clear to me yesterday when the prime minister spoke to me about my new appointment that he wanted me to stay on as secretary of state for Wales and I will be speaking for Wales around the Cabinet table, being Wales’s voice in Westminster and Westminster’s voice in Wales,” he said.

“The Wales Office is not being abolished, I stay as secretary of state for Wales. I readily admit that in the comings and goings yesterday this whole issue could have been communicated far more effectively from Downing Street.

“I can also see why opposition parties are climbing in on the game. But I just want to say, to particularly my Welsh Labour colleagues, that I stay as secretary of state, the Wales Office will remain and Wales’ voice, far from being sidelined, is still right there at secretary of state level round the Cabinet table.”

The move came amid mounting criticism of the decision to create a Constitutional Affairs Department headed by Lord Falconer.

Hain, who will combine his Welsh role with being Commons leader, will continue to push Welsh legislation through parliament.

His comments will be seized upon by the opposition who are angered at nature of the government’s latest structural review.

The Commons leader is traditionally meant to represent MPs in government.

Linking Hain to a Whitehall fiefdom such as the Constitutional Affairs Department will lead to fresh suspicion that the role of Commons leader has been reviewed to ensure the government gets its way in the Commons.

Hain’s responsibility for primary legislation will, say some, inevitably lead to a conflict of interest.

Tony Blair is being urged to get the government back on the front foot by focusing on public service reform.

As he prepares to face a crucial press conference before heading off on holiday, the prime minister is being told to refocus his energies on issues such as hospital and school improvements.

With parliament pausing for breath following the foundation hospitals rebellion and the school funding row, leader of the Commons Peter Hain said Labour’s key objectives should not be sacrificed due to events surrounding the death of Dr David Kelly.

The cabinet minister warned that the Kelly affair should not divert the focus of his colleagues away from their bid to join the euro.

Ahead of his press conference on Wednesday, Blair is also being urged to get back to “bread and butter” domestic issues such as public services reform.

But his monthly joust with journalists is likely to be dominated by Kelly-related questions as it provides the first opportunity for the media to pursue issue in-depth with the prime minister.

Blair was on a flight from Washington to Tokyo when he first heard of the apparent suicide.

With the House of Commons in recess he has been able to lie low since.

Blair will be forced to face the questions he has carefully avoided with his call for “restraint and respect” in the wake of Dr Kelly’s death.

However he will try to move the agenda on from Iraq and weapons of mass destruction, saying the relevant details will be better left to be dealt with by the judicial inquiry he established under Lord Hutton.

Newspaper reports suggested the head of the government’s delivery unit, Professor Michael Barber, will be invited to outline progress made on meeting public policy targets.

Echoing Hain’s call, the Blairite former transport secretary Stephen Byers will also use a speech on Wednesday to back the focus on health, education and crime.

He will tell the Social Market Foundation that ministers “must not allow pressures of the moment to distract or divert it from giving full attention to the three policy areas that will count at the time of the next election: the economy, the quality of public services. and safety in our homes and streets”.

Parts of England are set to find out if they will get the chance to vote on whether they want their own regional assembly.

Three areas – believed to be the North East, North West and Yorkshire and the Humber – are expected to be given the go-ahead for referendums.

Voters will be asked whether or not they want an assembly in their region and what level of local government would have to make way for the new assembly.

Deputy Prime Minister John Prescott will reveal details in the House of Commons.

The Government has not yet agreed on the powers the regional assemblies would hold, but it is believed they would include the ability to raise money through council tax and borrowing.

Those powers are expected to be set out later in a draft bill.

The Electoral Commission will review the local government arrangements in each region and recommend how the structures should be reorganised once the new assemblies are in place.

The Government says the first assembly could be put in place soon after the next general election.

Campaigners have been calling for regional assemblies ever since Scotland and Wales achieved devolution, but the Conservatives say there is little interest in them.
Mr Prescott, whose Hull constituency would be affected by the plans, has long wanted regional devolution.

But his oppositive number on the Conservative benches says few of those affected by the plans were interested.

David Davis said only 8,000 people – just 0.01% of the affected population – had responded to the consultation scheme on the proposals.

“The Government’s desire to plough ahead with the referendums despite such huge disinterest defies belief,” he said.

However, opinion polls suggest there is strong support for the assemblies in some regions.