Lower prices at the pump |02 October 2019

• High post-Saudi attacks prices yet to be applied

As motorists in Seychelles discover new reduced prices at the pump this week, the reality of a reverse situation will surely catch them in the coming weeks.

Actually, the Seychelles Petroleum Company (Seypec) has not yet applied the prices when they soared after the recent Saudi oil fields attacks. Indeed, the company buys its fuel on the international market on a fortnightly basis and the next consignment that Seypec has purchased is based on the market prices of the week that prices soared and this will mean that prices will therefore increase once Seypec starts to use the next cargo.

“This week’s outlook is a vivid example of the delayed effects of international oil prices on Seychelles,”  Seypec’s general manager – commercial, Sarah Romain, told Seychelles NATION.

“Thus motorists are enjoying a reduction of 43 cents on motor gasoline (Mogas) this week, which is a significant fall in our rate of Mogas, a stock which dates as far back as 4 weeks now. It is only in the next two weeks, depending on consumption, that we shall apply the prices of mid-September when they soared on the world market following the Saudi oil fields attack,’ she added.

This disparity in prices as regards international and local prices is therefore a question of the timing of the cargo purchases in Seychelles and their consumption. Oil prices soared after attacks on Saudi facilities. The drone attacks on plants in the heartland of Saudi Arabia's oil industry hit the world's biggest petroleum-processing facility as well as a nearby oil field, both of which are operated by energy giant Aramco. Together they account for about 50% of Saudi Arabia's oil output, or 5% of daily global oil production. It could take weeks before the facilities are fully back on line. The barrel of petrol hit a 65 USD high with markets left in deep turmoil.

Since then however, the biggest scare seems now over a significant and sustained price rise. Instead, recent political and economic developments have weighed strong on the markets. During the closing days of September, supply fears have waned amid a very quick recovery of the Saudi production. Simultaneously, there has been a surprise announcement by the kingdom that a cease fire agreement was partially reached with the rebels in Yemen where Saudi Arabia is waging a war. This situation is further compounded by a recent report of the International Energy Agency (IEA) that it might cut its estimates for global oil demand for 2019 and 2020 should the global economy weaken further. Indicators show that the global economy is weakening and which may lower oil demand expectations. So much so that prices at oil production felt by almost 4% over the week representing the biggest weekly loss in 10 weeks.

In Seychelles, Seypec is monitoring all the economics of the international price evolution of the world market. With an extremely volatile and turbulent market, it is well over all projection capacities for the national petroleum company to foresee any steady situation as it has no control on the fundamentals. But the evident fact is that all is done to contain any rising effects to its minimum and to pass to users the advantages of any decrease when this happens. The comparison of price tags in the neighbouring countries is always very clear about Seychelles being one country in the region offering one of the cheapest rates.

‘The oil market is so erratic and unpredictable that change of prices is currently going for the better and the worst practically each day,’ Mrs Romain explains. ‘This is why we strictly abide to our longstanding policy of adjusting our pump prices each Monday so that we may hand apply all changes to the consumer. This is what we are doing this week with a nearly half a rupee reduction but we can also foresee a higher tag price coming sooner than later.’

What is known is that the next consignment which will be sold to local users will be the stock pricing at the time of the Saudi attack which had a 15% sharp rise at that time. Motorists and other users are thus alerted on this hike to come.