No relief yet for consumers

Despite fuel price reduction

The prevailing tight economic environment on the local market is expected to continue despite the recent drop in fuel prices, as analysts predict minor changes to consumer indices due to fuel price drop.

Early this week, Botswana Energy Regulatory Authority ( BERA) announced an adjustment in retail pump prices for petrol, diesel and paraffin, attributing the decrease to the fall in oil prices over the past two months.

However, over stretched consumers reeling on the constantly rising commodities attached to geo politics and fuel prices, should not celebrate much, Kgori Capital’s Chartered Financial Advisor, Kwabena Antwi has warned. “Consumers who operate vehicles or equipment that uses fuel will immediately feel the impact as the cost of filling up their tank will fall. “However, for the consumer who relies on public transport, the impact of the reduction will be minimal. Businesses that adjusted their prices as a result of the rise in fuel prices are unlikely to reduce them now that fuel costs are coming down,” said Antwi. Antwi further warned that uncertainties continue to envelope the crude oil markets, invoking price instability. “If this trend ( global crude oil prices falling) continues, another downward fuel price adjustment is likely.

“We would caution that the drivers of global crude oil prices are constantly evolving and the downward trend in prices may stall or even reverse in the near future,” said Antwi. The fall in oil prices saw Brent crude prices average US$ 97.74 per barrel in August compared to an average of US105.12 a barrel in July 2022. Global reports indicate that fall in oil prices was mostly influenced by fears of a possible global recession, which could weaken the global demand for oil.

Meanwhile, the reserve bank recently indicated that there is a significant risk that inflation could remain elevated due to factors that include potential increase in international commodity prices beyond current forecasts, persistence of supply and logistical constraints to production, the economic and price effects of the ongoing Russia- Ukraine war, the uncertain COVID- 19 profile and the escalating tension between China and Taiwan. The Bank of Botswana ( BoB) further said on the domestic front, the risks for higher inflation than currently projected relate to possible annual administered price adjustments, short- term unintended consequences of import restrictions, second- round effects of the recent increase in administered prices, upward pressure on wages across the economy emanating from increase in public service salaries and entrenched expectations for higher inflation, which could lead to general higher price adjustments.