#Oilgate: A billion rand heist by insiders who sold SA’s strategic oil reserve

By Alec Hogg

Over the past couple months, I’ve been accumulating knowledge about the global oil market. The education has been slow – oil trading is complex, numbers are huge, players diverse and pricing depends on the quality of grade determined by geography.

My interest in understanding oil was sparked by a stinky deal in December when South Africa sold all of its strategic oil reserves. It was a decision akin to the Bank of England dumping its entire gold stocks 16 years ago at the absolute trough of the bullion market (below $300 an ounce). Except this was no simple mis-timing of the market.

South Africa’s 10-million barrels of emergency oil reserves were sold at spot for $10 below the month’s lowest price reached in the month. What made the deal even crazier is the oil market is currently in contango where sellers receive a premium for forward delivery. So nobody who owns oil sells at spot. Also the sale itself is unprecedented – the International Energy Agency recommends countries keep at least 90 days in strategic reserves. SA is now the only sizeable economy on earth that has none.

This #Oilgate makes Nkandla look like a picnic and is sure to keep the new Public Protector busy. Because of complexities in the oil market, since the first disclosure of the sale, bullshit has been baffling brains. So we found an insider to quantify how it cost taxpayers. And unpack what went down in language we can all understand. Have a read of the interview. It’s on Biznews now.