Friday 11 January 2008

Botswana braces for high oil prices

Source: Mmegi

International oil prices briefly hit the $100 (about P604) mark a barrel in the New Year, raising concerns of further retail fuel prices and further inflationary pressures in Botswana.

Maungo Lebanna, an analyst with Investec Asset Management Botswana, says her inflation forecast for December could breach the 8 percent mark to 8.3 percent.

"Our inflation outlook has deteriorated. We previously thought inflation would peak at 8 percent by February; now we see it peaking at around 9 percent. Although domestic sources of inflation are muted, nontradeables inflation is likely to go up in the first quarter of 2008," Lebanna said.

Botswana's inflation edged from 7.3 percent in October to 7.7 percent in November influenced mostly by food and transport indices.

Transport inflation increased marginally in November, with the year-on-year rate edging up to 8.7 percent on the back of higher operating costs, mainly fuel.

Lebanna noted that over a period of one year, from November 2006 to November 2007, crude oil prices had increased by 40 percent, while local petrol prices increased by 11 percent.

This further fuelled prospects of further fuel prices in the first quarter of 2008 to cater for the fuel price cycle.

She said this mismatch implies that the current pump prices of petrol, diesel and paraffin do not reflect the true value of local fuel prices.

"Unlike South Africa, Botswana does not respond instantly to changes in crude oil prices causing the under-recoveries to build up in the system.

Depending on the movement of crude oil prices, it is highly possible for another fuel hike in the first quarter of 2008 to make up for the current under-recovery", said Lebanna.

No comments: