Ballooning oil prices fuel fears of inflation

AS crude oil prices continue to hit record highs on the world markets, fears of rising inflation are taking hold locally and abroad.

Both Government and the private sector have expressed concern about the worrying trend but insist ‘nothing much can be done.’ During this past week, crude oil prices broke through the US$70 (about N$455) per barrel level. The continued rise, triggered by soaring demand outstripping supply on the world market and of late the violent hurricane bringing refinery business in Mexico to a standstill, has further curtailed prospects of easing prices.In Namibia, as is happening elsewhere, fears of fuel price increases have flooded the market.Conrad Wessels, a foreign currency dealer with Bank Windhoek, said the prevailing situation was likely to upset macro-economic fundamentals as inflation might start picking up.However, on a positive note, a strong Namibian dollar was seen as partially shielding the public from the adverse effects of fuel prices.Currently, the Namibia dollar is trading at an average of N$6,50 to the US dollar.Wessels said the local currency was likely to remain strong for the foreseeable future, hence inflation could be kept in check.Firming commodity prices, notably gold, trading at US$435,90 per ounce, and platinum, at US$894, were aiding the strength of the South African rand and Namibia dollar.”Certainly the Namibia dollar is likely to remain strong for the foreseeable future,” said Wessels.For this reason importing fuel had not become a headache, “at least for now”.But in the medium to long term, fuel price hikes were inevitable.”The trend on the world market is rather disturbing as oil prices are firming.We have been a bit lucky because the local currency has been trading stronger against the US dollar, hence the impact has not been felt strongly.However if the trend continues, the negative effects will certainly trickle down to the ordinary man,” said Wessels.Forecasts in South Africa were that the price of petrol could shoot to as high as N$7 or N$7,50 per litre by year-end.Namibia, currently trailing behind South Africa in fuel prices, is set to face the same dilemma given the surging crude oil prices.Mines and Energy Permanent Secretary Joseph Iita said Government can only help to a certain extent.Beyond that, not much could be done.He said: “We cannot assure the public that fuel prices will not go up.What is happening on the world market is regrettably out of our scope, yet it has a serious impact on us.”The continued rise, triggered by soaring demand outstripping supply on the world market and of late the violent hurricane bringing refinery business in Mexico to a standstill, has further curtailed prospects of easing prices.In Namibia, as is happening elsewhere, fears of fuel price increases have flooded the market.Conrad Wessels, a foreign currency dealer with Bank Windhoek, said the prevailing situation was likely to upset macro-economic fundamentals as inflation might start picking up.However, on a positive note, a strong Namibian dollar was seen as partially shielding the public from the adverse effects of fuel prices.Currently, the Namibia dollar is trading at an average of N$6,50 to the US dollar.Wessels said the local currency was likely to remain strong for the foreseeable future, hence inflation could be kept in check.Firming commodity prices, notably gold, trading at US$435,90 per ounce, and platinum, at US$894, were aiding the strength of the South African rand and Namibia dollar.”Certainly the Namibia dollar is likely to remain strong for the foreseeable future,” said Wessels. For this reason importing fuel had not become a headache, “at least for now”.But in the medium to long term, fuel price hikes were inevitable.”The trend on the world market is rather disturbing as oil prices are firming.We have been a bit lucky because the local currency has been trading stronger against the US dollar, hence the impact has not been felt strongly.However if the trend continues, the negative effects will certainly trickle down to the ordinary man,” said Wessels.Forecasts in South Africa were that the price of petrol could shoot to as high as N$7 or N$7,50 per litre by year-end.Namibia, currently trailing behind South Africa in fuel prices, is set to face the same dilemma given the surging crude oil prices.Mines and Energy Permanent Secretary Joseph Iita said Government can only help to a certain extent.Beyond that, not much could be done.He said: “We cannot assure the public that fuel prices will not go up.What is happening on the world market is regrettably out of our scope, yet it has a serious impact on us.”