Batswana will face a black Christmas as government recoiled to the high international crude oil price by hiking the fuel- pump prices on Friday.
Fuel prices have being hovering near the US $ 100 mark ÔÇô about P 600ÔÇöper barrel in the international markets for some time prompting Bank of Botswana and economic analysts to warn against the possible fuel price increase.
Although the central bank left the interest rates on hold at its last month’s Monetary Policy committee, it warned against a possible rise in fuel pump prices which would impact on inflation going forward. Inflation has been moving in zigzag bands over the last three months and by end of October it sprung up from 6.8 percent to 7.3 percent.
On Friday night, the Ministry of Minerals, Energy and Water Affairs warned consumers that the retail pump price will go up immediately after Friday mid-night. It said the increase will affect petrol, diesel and illuminating paraffin.
Both lead and unleaded petrol will be adjusted upwards by 25 thebe per liter and diesel will edge up by 20 thebe while paraffin will also move up by 20 thebe per liter.
Fuel prices were last increased on July 1, 2007 also responding to a spike in the international prices of crude oil.
“The increase is due to the increase in the prices of crude oil in the international markets. The prices for the period under review have been fluctuating around US $ 80 per barrel at the end of October. This has resulted in the negative effect on the slate,” Acting Permanent Secretary in the Ministry, Kago Moshashane, said Friday.
The latest move is aimed at proppingÔÇôup the petroleum fund which is used to subsidise fuel in the country. The government only adjusts prices upwards once it feels that the fund is under threat of depletion.
“Government will continue to monitor the development of the prices of oil products in both regional and international markets to ensure optimal prices to both the general public and fuel supply industry,” Moshashane added.
The latest move is expected to have secondary effects on the economy as other sectors are expected to increase prices to feel up for the gap.
Unfortunately, the very poor and the unemployed are to pay a heavy price. The move will lead to a general price increase across all the sectors but the retail sector will cushion itself by doing the same, leading to a general price spiral that will even affect the basic food.
Further, the boiling international crude price come at a time when the US economy has been badly dented by the housing sub prime market which could easily drive the giant emperor across the Atlantic into a state of recession as the already heavily burdened consumers feel the pinch of the higher oil prices.
This will have a ripple effect on Botswana ÔÇö- the largest diamond producer ÔÇô as 50 percent of the world diamonds are being sold in USA. Further, the oil prices will directly affect the mine operations since they are the largest fuel energy consumers and they use it in their operations.
That will have another negative impact on Botswana’s economy including the already battered pension funds and foreign reserves as most of the world’s reserves are in the US dollars. Most of the investors are already dumping the US dollar as the international currency and they are looking for alternative investment vehicles. The move has resulted in a serious weakening of the dollar against other major currencies ÔÇô especially the British pound sterling and the euro.