Fuel prices have been increased by 50 thebe across the board with petrol prices now selling at P 9.60 per litre. The increase is in line with developments on the international markets. The last fuel increase, by a similar margin was effected on 17 September.
Oil prices firmed to levels around USD 116/barrel during Q3 finding support from positive GDP numbers from China (which expanded by 7.6 percent y/y during Q2), supply disruptions in the North Sea and Iran as well as continued tension in the Middle East as fighting in Syria intensified.
If fuel prices rises further from the current prices on the international market, coupled with the depreciation of the BWP against the USD, another increase in local fuel prices will be inevitable, although this will likely be effected early next year.
The latest increase in fuel prices is expected to push the November inflation rate higher to levels between 7.3 percent y/y and 7.6 percent y/y. Inflation stood at 7.1 percent y/y in September and is projected to close the year around 7.3 percent y/y, above the Bank of Botswana 3-6 percent objective range.
It is expected to reach the Bank of Botswana objective range mid 2013 and the central bank is therefore expected to keep the bank rate unchanged at its next meeting in December with a possible downward adjustment during Q3 2013 as inflation converges towards its 3-6 percent target range during the period.
Meanwhile, the EIA projects brent crude oil prices to average $112/ barrel in 2012 on reduced demand mainly in the developed world. Many companies in the US have lowered their earnings guidance, citing uncertainty over the ‘fiscal cliff’ in the U.S. (a combination of scheduled tax increases and reduced government spending scheduled to take effect in the first quarter of 2013) as well as concerns over the European economy.
Eurozone unemployment reached a 2012 high of 11.6 percent in October and several Purchasing Managers’ Indices (a leading economic indicator) are still showing contraction in the manufacturing sectors of European economies further dampening the outlook of oil prices. (Motswedi Securities)