Future limitations of oil supply as a major driver of spatial development plans

Currently, energy policy reforms are sector-based (oil, gas and electricity) and not particularly related to other sectoral reforms (e.g. transport and housing) that are consumers of energy services. The evolution and implementation of policies dealing with oil security of supply, and integrated planning and provisioning for infrastructure investment is but one of the many policy challenges facing South Africa. The essence of energy security entails the integration of economic, environmental, and social objectives in a manner that makes countries sustainable. Energy security of supply and use of energy services should be an integral part of spatial development plans.

The attainment of the above mentioned policy objectives and the migration of the South Africa economy to a low carbon economy represent a complex policy agenda. Energy policy on its own will be insufficient to achieve this policy objective. Of importance to consider is the overall role of energy in the economy. Because energy demand is a derived demand, it should be treated as a premier resource or primary feeder for economic growth, spatial development plans, human settlements, public transport, and sustainable communities (Figure 74).

Price of oil

S (MSC) G

S¹(MPC¹ )

Q¹ P¹ E

Quantity of oil P²

Q²

D (MSB) Demand for oil

Initial supply of oil Increased cost of supply for oil F

Figure 74: The economic role of energy Source: Own illustration

In any spatial development, land-use patterns must be linked to what is reflected in Figure 74 and be informed by energy considerations. However, once established, land-use patterns largely determine energy needs. Investments in the above-mentioned sectors necessitate energy considerations that should be priced accordingly.

Distortions in land use patterns create high transaction costs in the economy. Distortions include various types of under-pricing of human settlements (housing, motorised travel, energy and water resources). Such distortions create transport demands that are costly to satisfy. Current human settlement investment patterns in South Africa include planning practices that favour motor vehicle travel over other modes, and land use development practices that create transport-dependent communities (Dunn, 1998; Parnell, 2008). For instance, the provision of public transport has been severely constrained by past and current land use development and allocation policies that have resulted in low housing densities and new low-income suburbs being located furthest from work opportunities and social facilities (Wolpe, 2006). Transport and energy demands are costly to meet under such circumstances. South Africa cannot afford to have plans for housing, health, education, agriculture, transport and energy that are not linked to land-use patterns. Land-use policies should also consider the juxtaposition of workplace and residence, and should promote sustainable development patterns.

This presupposes that the South African government will have to reconsider the way it is structured and functions. For instance, rising oil demand happens at a local government level. However, the local sphere of government does not and cannot procure oil services, which is rightly a national government competence.

Further, oil demand in South Africa is largely driven by transportation. The Department of Transport is responsible for transport planning, but not for oil resource planning, nor do they have structured input into spatial planning that occurs at local government level. Oil resource planning is a function of the Department of Energy. Residential developments also give rise to transportation costs that lead to higher energy expenditure.

Intergovernmental coordination and business partnerships are critical in ensuring that there are synergies between spatial development plans energy security of supply and affordability. Investment models and

energy should be at the centre stage of spatial developments, failing which South Africa will continue to battle with the challenges of high household energy intensity.

Challenges of consolidating urban development by investing in sustainable human settlements that give people access to economic opportunities and linked to accessible transport routes will have to be planned, budgeted for and delivered. Government will have to implement the 1995 Urban Development Strategy and the 1997 Urban Development Framework, which set out a vision for transforming the disintegrated cities, and that focused on ending the segregated pattern of human settlement and the introduction of integrated developmental planning.

7.8 Summary

In this chapter, arguments have been presented for the prioritisation of a number of selected policy measures to ensure oil security for South Africa. The criterion for selection has been based on the arguments concerning geo-political, geo-economic and geo-strategic considerations, presented in the earlier chapters.

The main thrust coming from this chapter is that South Africa’s energy security of supply, in particular oil security of supply, depends on many factors, the main ones being economic growth and price of energy.

Although both factors are hard to forecast with certainty, it is likely that the South African economy and thus oil, will continue to grow over the medium and long term. The other primary issue facing the South African oil security of supply is the urgent need for refinery and pipeline capacity expansion. Investment demands are high, costly and pressing. Untimely delays in investments may compromise the security of energy supply.

Energy policy must become and integral part of South African international trade and foreign policy-making. International and foreign policies are crucial policies for the enhancement of South Africa’s energy security of supply. Domestically, policy for the oil industry as expressed in the Energy Master Plan for Liquid Fuels should be specific with regards to sector goals, supply security, investment decision-making, timing and approvals, energy efficiency and demand-side management, environmental issues, pricing and regulation.

South Africa’s low economic density and long distances make the county’s economic geography and spatial development patterns a very difficult development challenge. Reshaping South Africa’s economic geography will require the Government to address the country’s spatial and economic fragmentation. Land use patterns should support reduced energy needs by providing easy access to services and public transportation options should be promoted. South Africa can learn from other countries (China, India and Indonesia) that pursue land-use policies that enforce close juxtaposition between areas of economic opportunities and residences. This is because high density, compact cities allow for cost effective transport systems, especially public transport. By pursuing these policies, government can assist in laying the foundations for inclusive development and neighbourhoods.

Based on the multiple recommendations of this chapter, the next chapter presents the summary and conclusions.

CHAPTER 8