Oil price hits 3-year high |17 January 2018
• Higher fuel prices expected in Seychelles
There are significant signs that the country is set to face price increases on the energy front at the beginning of this year after the oil price rose to a three-year high at $70 a barrel (Fig. 1) on the commodity world markets.
(Fig. 2) Oil prices have risen more than 13 percent since early December, and there are indications of overheating. Geopolitical risks and confidence in global growth have contributed to boost the prices at source.
Seychellois consumers have been spared a major increase of fuel products lately as actual purchase prices from overseas imports are only applied a few weeks after, Seychelles NATION has learnt. This delayed application of updated prices locally is due to logistical factors. Actually, it is reported from secure sources that the price monitoring and strict policy of the national petroleum company to pass on any fall or increases in prices are the common denominators that temper the effects on the local sales.
This is bound to have nationwide consequences for Seychelles on electricity prices following this aggressive and continued increase in the prices of crude oil on the world market. As fuel oil, the product that runs the power generators of PUC for electricity production, counts for nearly 44% of the country’s total imports of all petroleum products used at domestic level, then the mathematics clearly shows that all electricity consumers will have to bear the cost of the increase. There is already a huge effort being made by government to significantly reduce the excise tax applicable to fuel used by the public utilities in line with a special provision of the Excise Tax Act. The revenue that the government could have potentially earned is instead passed on as a benefit to the entire population. Nevertheless, there are external and uncontrollable factors that the authorities cannot fight against, namely and primarily the rise of crude oil prices.
The other consumers that will surely have to face world high prices are indeed the motorists. Even if the rates of Mogas are remaining unchanged these days, it will definitely have to go up in the coming days. This is surely not the start anyone would have wanted for the beginning of the New Year, but combined effects of weather, politics and economic factors are pushing the cost of crude oil up. Pumps all around the world are changing their price tags to cope with the increase of crude oil. In some neighbouring countries like Mauritius and Reunion, prices have already been raised well before Christmas. Actually as Fig. 3 shows, the Mogas price presently stands at R20.23 in Mauritius and R24.07 in Reunion Island whereas in Seychelles it is R18.48. Analysts view this as a major achievement for such a small country where the economy of scales is not as favourable as it is in the two neighbouring countries.
The world oil market has rallied in recent weeks as international investors and speculators bet on an increasingly tighter market. This situation is worsened by data showing declining U.S. stockpiles and threats on supply from major producers such as Iran and Venezuela. Furthermore, as OPEC and 10 members outside the cartel agreed late last year to extend an accord to hold down crude output, supply has gone drastically down during the fourth quarter of last year. The agreement, which was implemented at the start of 2017, is meant to rein in the global supply glut and raise prices. The price of crude oil has risen roughly nearly 30% over the past year and prospects for a turnaround are bleak, to say the least.
As the month of January unfolds, the price re-adjustments at the petrol stations in Seychelles are bound to occur within the coming days. Seychelles NATION has received some indication that the percentage of increases on the world market will be applied to only the CIF or landed price, which accounts for 40% of the retail price of fuel. This will surely dilute the bitter pill that the world suppliers are imposing on all countries around the world to swallow.