South Africa: Pipe dream of infinite fuel is a costly myth

Bids by Transnet Pipelines and iPayipi to construct a new liquid fuel pipeline between Durban and Gauteng received prominent coverage in the financial media recently.

The pipeline is intended to address anticipated fuel shortages in Gauteng by 2010 and to enhance security of supply. However, a crucial premise needs to be interrogated: will sufficient oil imports be available and affordable over the pipeline’s lifetime to ensure it is viable?

It seems the competing bidders have not done their homework. In its Medium-Term Oil Market Report last month, the International Energy Agency (IEA) issued a stern warning: “Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with Opec spare capacity declining to minimal levels by 2012.” Compared with the IEA’s history of rosy supply forecasts, this statement is a watershed.

It is just one of a growing number of voices raising the alarm about an imminent oil crunch as demand growth outstrips supply.

Business Report