Wednesday, September 23, 2020

Markets punch the air over fuel price reduction

The financial markets this week applauded the Ministry of Minerals, Energy and Water Affairs for having slashed the fuel prices in line with the international falling crude oil prices pointing out that this will add some energy into the already jaded economy.

“I think this is a very good move, but my concern is whether the petroleum fund ÔÇô a collective investment that is used to subsidise the pump priceÔÇöif they can confirm that it is in a good stance.
“I think they have considered the healthiness of the fund,” Geoffrey Bakwena said.

The Department of Energy Affairs through the permanent secretary in the ministry, Gabaake Gabaake, announced Thursday night that diesel, illuminating paraffin and petrol will ease by 50 thebe per liter each starting Friday morning.
“The price adjustment is caused by the slight decrease in the worldwide crude oil prices. The government will continue to monitor petroleum products in both regional and international markets and make reviews and adjustments on monthly basis,” the statement from the ministry said.
Fuel and international food prices sparked an upsurge in inflation rate since mid last year. Last month, fuel prices reached record high of US $147 per barrel; however, they have edged down to US $ 115 by Friday.

But the current ease is largely seen as a temporary measure as Georgia and Russia are engaging each other on a cross ÔÇôborder war over south Ossetia. The conflict is likely to inflate the fuel prices as both countries and their allies were to go on the offensive.

“We welcome the move if you consider where the price was some few weeks ago against last year. However, the food price is going to be tricky because the price would not come down.
“Internationally, this is taken as a breather and the thinking is that prices will still have to rise but that would be helped by forecasting economic slow-down in the most mature markets,” head of Capital Asset Management, Leutwetse Tumelo, said Friday.
On Friday, the EU’s 14 member states announced that their economy had contracted by 0.2 percent while China was saying a few weeks ago that it was engaged in some stockpiling of commodities’ raw materials.

The move by the ministry is expected to instill confidence that at least government is answering the corporate sector’s complaints that some of the factors which are influencing the inflation rate are being taken out of calculations.

By mid last year, crude oil prices were averaging US $70 per barrel ÔÇö and it has since escalated to over US $100 per barrel ÔÇö a figure last seen during the 1970s. As at the first half of 2002, crude oil prices were around US $28ÔÇöa figure that was then considered to be too high, but it was picked-up by hedge funds which wanted to shy away from the US dollar as the most reliable and safest and priceless commodity. Further, the problem was made worse by George W. Bush attacks in the Middle-East and central AsiaÔÇö which are prime areas of the production of crude oil. The attacks on Afghanistan angered the Muslim community who are the prime producers of the mostly sort afterÔÇöcrude oilÔÇö products in the world.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.