Abstract
Ph.D.
There is little research undertaken on the economic assessment of oil security of supply from the dimensions of geo-politics, geo-economics and geo-strategy. This study seeks to bridge the gap by providing new analytical and empirical work that captures the impact of geo-politics, geo-economics and geo-strategy on oil supply, consumption and price. This study is the first to define, analyse and contextualise the South African oil security of supply from a geo-political, geo-economic and geo-strategic perspective. It examines oil related factors that influence broader energy, economic and environmental policies, as well as developmental goals in South Africa. South Africa is faced with the task of delivering policy outcomes that will result in meeting the country’s energy demand at the lowest possible cost. Rising oil prices, rapidly increasing motorisation, clean environment and sustainable urban development are public policy challenges facing the South African economic, energy and transport sectors. Policy options to resolve these challenges are complex, varied and evolving.
Economic indicators such as economic growth, inflation, balance of payments, trade balance, the general household surveys, income and expenditure surveys, and other economic data are used to develop a set of descriptive statistics to assess the impact of oil prices in South Africa. Increasing oil prices and the peak oil theory are raising new concerns about the availability of sufficient energy resources and the capacity of economic markets to allocate effectively those resources. A discussion on the optimal price path, extraction costs and mineral rents in an economy is presented. This study uses neoclassical Leontief and Cobb-Douglas production functions to examine and illustrate factors that could reduce or strengthen the linkage between energy use and economic activity over time. The Herfindahl Hirshman Index is used as a measure of oil supply concentration ratio and proxy for geo-political risks and oil imports dependency risks. In the analysis of the economics of exhaustible natural resources, this study discusses how the economic theory on the matter has evolved since the Hotelling model of optimal resource depletion. The Hotelling model is challenged, as marginal extraction costs of oil are rising, demand is changing and growing, and the world price is distorted by geo-political, geo-economic and geo-strategic factors. Using the Simple Econometric Simulation System (SESS) model, energy and oil outlook in the South African economy up to 2035 is simulated and economic vulnerability risks are calculated.
Emerging from the examination of global oil statistics is confirmation that the price of crude oil has remained persistently high over recent years, reflecting geo-political, geo-economic and geo-strategic risks, as well as growing global oil demand. The rapid rise in oil prices is the biggest challenge facing the international economy; developing countries are particularly vulnerable. Linked to this is that environmental concerns ranging from local air pollution to global climate change bring into question the sustainability of relying on non-renewable energy resources. Searches for alternative energy resources to substitute fossil fuels, especially in the transport sector, have not yet yielded economically viable options. It is argued that the substitution of oil products in the transportation sector remains a challenge from which South Africa is not immune; that South Africa’s demand for oil continues to rise, driven by economic growth and a development trajectory highly dependent on petroleum products; and that dependency on foreign oil causes South Africa to be economically vulnerable.