Davos is an opportunity to catch up with old friends. Which I did last night with a rather famous pal who lives in Dubai and is deeply plugged into the Middle Eastern economic and political scene. His accurate annual updates have made him an excellent source on where the oil price is headed. This year he reckons the trough is close. The fall in the price to below $30 a barrel, he says, wasn’t on anyone’s radar.
The oil price plunge is rebalancing geographic wealth equations – providing a hidden boost to oil importing (mainly Western) nations. For South Africans, though, it is a sad reminder of how the collapsing Rand has hurt. Had the currency remained where it was just two years back, even after hefty tax increases we’d be paying around half the current price of petrol. While the oil price has fallen by almost three quarters – from $100 to $28.50 – the Rand has depreciated by well over a third.
My pal reckons it is close to the bottom. So, as with the commodity boom, South Africa’s foot-shooting has made it miss out on another global bonus. Indeed, with Government finances tight, reinstated Finance Minister Pravin Gordhan may be forced to add another chunk to the fuel tax in his February Budget. Coming on top of last year’s record 80c a litre increase, that’s going to hurt. Even more so when the dollar price of crude recovers, as it surely must pretty soon.
