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World oil prices shoots to pre-pandemic level Motor gasoline in Seychelles hits a nearly 9-year record |16 March 2021

World oil prices shoots to pre-pandemic level         Motor gasoline in Seychelles hits a nearly 9-year record

The motor gasoline price at the pump has climbed to R22.89 a litre this week, the highest in Seychelles since July 2012.

This is due to the combined effect of the rapid price surge on the world oil market and the continued weakness of our rupee against the dollar.

At the beginning of this month, the world oil producers regrouped under the Organisation of Petroleum Exporting Countries and its allies (OPEC+) sent a shockwave news around the world by deciding to reduce production. This unexpected move dragged the oil prices to the USD 70 level. This is no-good news at all for oil-importing nations as the ripple effects of such increases on small economies like Seychelles would push inflation up as well as prices of other goods and services. Further, other encouraging news for a relaunch of the world economy have emerged and which are boosting oil demand up. These are namely, the USD 1.9 trillion U.S. economic stimulus package and more positive anti-Covid-19 vaccine news. Further, the recent Texas Freeze in the US has also exacerbated the situation by depriving the market of millions of barrels of oil production and refining capacity thus limiting outage.

 

FIG.1

The motor gasoline price on the global market has taken the upward trend since November 2020 and as at the end of last week, it had risen by 94%. Other products have also increased – gas oil by 77% and fuel oil by 62% during that same period. OPEC+ is driving the market according to its rules and desire. The oil cartel will continue to tighten the market as the world stocks decrease following a relaunch of the world economy.

“This is a pure economic principle where demand will start overlapping on supply with the producers giving a helping hand,” Seypec’s general manager, commercial, Sarah Romain, told Seychelles NATION.

“The move to limit production and exports by the producers is putting the entire economic recovery at risk in importing countries and the more so in dramatically hit economies by Covid-19,” Mrs Romain said.

FIG.2

 

In Seychelles, these record high prices of motor gasoline and gas oil these days are caused by the compounded effects of the world oil price spikes and the high rate of the rupee to the dollar. This price boiling atmosphere is being harshly felt by motorists at the pump and the local petroleum company states that all is done to mitigate the increases.

“With the borders opening in Seychelles and the economy picking up, we can only hope and expect that the rupee will improve its rate of exchange and therefore ease the grip of the currency component on the prices at the pump,”Mrs Romain said. “But this improvement of our exchange rate will not come overnight, and consumers will have to bear the burden of external factors such as world oil prices. It is a very unfortunate irony but quite normal that world oil price increases at a time when economic confidence picks up with measures to combat the coronavirus are yielding results,” she added.

 

 

 

 

 

 

 

 

 

 

 

Price at the Pumps (Rs/L)

Price Paid to Supplier (Rs/L)

Taxes (Rs/L) (fixed)

SEYPEC/Operator Margin (Rs/L) (Fixed)

Exchange Rate ($/Rs)

Movement

13-Jan-20

                        18.76

                                 7.42

                        8.59

                            2.75

                       14.22

              (0.05)

3-Feb-20

                        18.78

                                 7.44

                        8.59

                            2.75

                       14.22

                 0.02

17-Feb-20

                        18.39

                                 7.05

                        8.59

                            2.75

                       14.22

              (0.39)

9-Mar-20

                        17.92

                                 6.59

                        8.58

                            2.75

                       14.22

              (0.47)

23-Mar-20

                        17.77

                                 6.44

                        8.58

                            2.75

                       14.24

              (0.15)

30-Mar-20

                        16.07

                                 4.74

                        8.58

                            2.75

                       14.24

              (1.70)

6-Apr-20

                        15.76

                                 4.44

                        8.57

                            2.75

                       14.23

              (0.31)

24-Apr-20

                        16.47

                                 5.14

                        8.58

                            2.75

                       17.82

                 0.71

25-May-20

                        14.96

                                 3.64

                        8.57

                            2.75

                       17.82

              (1.51)

15-Jun-20

                        15.26

                                 3.94

                        8.57

                            2.75

                       17.82

                 0.30

29-Jun-20

                        16.04

                                 4.71

                        8.58

                            2.75

                       17.82

                 0.78

13-Jul-20

                        16.63

                                 5.30

                        8.58

                            2.75

                       17.82

                 0.59

3-Aug-20

                        16.66

                                 5.33

                        8.58

                            2.75

                       18.11

                 0.03

23-Aug-20

                        17.38

                                 6.05

                        8.58

                            2.75

                       18.11

                 0.72

21-Sep-20

                        17.55

                                 6.22

                        8.58

                            2.75

                       18.11

                 0.17

9-Oct-20

                        17.74

                                 6.41

                        8.58

                            2.75

                       18.11

                 0.19

9-Nov-20

                        17.47

                                 6.14

                        8.58

                            2.75

                       18.11

              (0.27)

13-Nov-20

                        18.34

                                 7.00

                        8.59

                            2.75

                       20.64

                 0.87

30-Nov-20

                        18.76

                                 7.42

                        8.59

                            2.75

                       20.64

                 0.42

14-Dec-20

                        19.78

                                 8.44

                        8.59

                            2.75

                       21.65

                 1.02

28-Dec-20

                        20.40

                                 9.05

                        8.60

                            2.75

                       21.65

                 0.62

11-Jan-21

                        20.67

                                 9.32

                        8.60

                            2.75

                       21.65

                 0.27

8-Feb-21

                        21.25

                                 9.90

                        8.60

                            2.75

                       21.75

                 0.58

22-Feb-21

                        21.67

                               10.32

                        8.60

                            2.75

                       21.75

                 0.42

8-Mar-21

                        21.64

                               10.29

                        8.60

                            2.75

                       21.70

              (0.03)

   15-Mar-21

                        22.89

                               11.53

                        8.61

                            2.75

                       21.70

                 1.25

 

 

 

 

 

 

 

FIG.3

 

Motor gasoline is fast approaching the R23 mark and is nearing the record of April 2012 when the retail price at the pump reached R24. It is also of common knowledge that fuel prices are mainly impacted by the rupee / dollar exchange rate and the fluctuations of world oil prices. The exchange rate of the rupee is a key element driving domestic prices at the pump. For example, at the end of May and beginning of June 2020, when the oil prices on the world market were at their lowest and the rupee were still at a high exchange rate of the USD, Seychelles enjoyed the lowest motor gasoline and gas oil prices which hovered around R14. But as the weeks and months followed, the rupee started to retreat against the dollar offsetting the benefits of rock bottom world oil prices. So much so, that at the end of last year, process of motor gasoline and gas oil flirted with the R20 range.

But now, the international oil prices have rebounded to its early 2020 level adding to the weak rupee to push prices higher at the pump in Seychelles.

“Our currency which stood at R14.23 against the dollar at the outbreak of the Covid-19 pandemic has reached R22.89 this week,” Mrs Romain noted.

“This decrease in the local currency value has impacted the retail price of motor gasoline by R2.74 per litre, meaning that motorists would have paid R18.90 had the rupee remained at the pre-Covid exchange rate. This is the harsh reality that is caused by factors outside the control of the national petroleum company. But as this surge in prices hits us, we must stress on the fact that Seychelles maintains its position as the cheapest price level of Mogas in this part of the Indian Ocean, a notable achievement considering that our volume of purchase is quite low compared to neighbouring countries who should normally benefit from the economy of scale,” Mrs Romain added.

FIG.4

 

As the year rolls on, forecasts are such that oil prices will continue moving on the upward trend at least for March and the following 2 months. This is explained by the fact that the world consumption will receive a boost as countries will get out of lockdowns with demand offsetting supply. The price tag of USD 70 might well take the lift in the second part of this year with analysts talking about a barrel of oil flirting with the USD 100 mark. It is a simple economic principle that can caution this statement with renewed economic activities and a demand that will keep climbing.

 

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