Nicola Mawson
With newly inaugurated US President Donald Trump set to implement his “drill, baby, drill” policy, his pushes to drop oil prices and the anticipated slowdown in economic growth across the world could well see oil prices dropping to the benefit of South Africa, a major oil importer.
Last week, Trump told business leaders at the World Economic Forum (WEF) in Davos he wanted to lower global oil prices, interest rates and taxes, and warned they face tariffs if they make their products abroad.
“I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world. I’m also going to ask Saudi Arabia and Opec to bring down the cost of oil,” Trump said.
“Right now the price is high enough that that [Russia-Ukraine] war will continue. You gotta bring down the oil price. That will end that war. You could end that war.”
Ricardo Evangelista, analyst at ActivTrades, noted that crude oil prices fell in early Monday trade, dropping below the $74 level for the first time in more than two weeks.
He noted that the price per barrel came under pressure after Trump called on oil carter OPEC+ (Organization of the Petroleum Exporting Countries) to lower oil prices.
“Trump stated that member nations of the cartel should take measures to reduce oil prices, arguing that this would harm Russia’s economy and compel Moscow to be more amenable to negotiating an end to the war in Ukraine,” he said.
Evangelista added that, with the new US administration prioritising lower energy costs, there may be further room for a decline in oil prices.
Although oil is on the decline, the current numbers from the Central Energy Fund indicate that fuel will increase next Wednesday, given an under recovery of 84.7 cents a litre for 95 Unleaded petrol and 92.7 cents for 93 Unleaded, while diesel is looking set for hikes of between R1.07 and R1.13 per litre.
Year-on-year, the price of fuel was down some 10.2% as of December.
Wichard Cilliers, director and head of market risk at TreasuryONE, noted that crude remained on track for a weekly loss of approximately 3%, reflecting concerns over increased US energy production after Trump's declaration of a national emergency to enhance output.
Bapedi crown prince and energy expert, Adil Nchabeleng, told Business Report that during his first administration, Trump managed to literally drive the price of fuel so down that it was cheap and affordable.
Nchabeleng added that the price of oil and gas in the US were so high that they were “unaffordable for most ordinary people”. He explained that Trump was also seeking to ensure that oil prices in the US were not adversely affected by the ongoing war in the Middle East.
Trump, Nchabeleng said, was aiming to ensure that the country had sufficient oil reserves to drive economic growth and – as the blend used in the US was different to that of other countries – he could well do swaps.
“It's going to be a very interesting time,” said Nchabeleng.
However, Anchor Capital investment analyst, Seleho Tsatsi, said oil was a particularly difficult commodity to predict.
“What we can do, however, is stay on top of what’s driving the price,” he said.
Oil has had a decent start to 2025 for a few reasons, said Tsatsi. The biggest factor was probably the more stringent US sanctions on Russian oil exports and the Russian oil sector, he added.
“Oil demand and prices are heavily correlated to GDP growth. US economic growth continues to be strong. With that said, expectations are for global growth to slow down. That should reduce global oil demand,” Tsatsi said.
Tsatsi said the Trump administration has also said it intended to boost US production, which could boost the supply equation globally.
BUSINESS REPORT