High global oil price harmful to local economy

THE world is currently witnessing the shooting up of international oil prices with the commodity hitting over US$70 (N$455) per barrel early this week and again yesterday.

The recent spike , according to a prominent local economist, could see inflation rising. In June, consumer inflation jumped from 1,25 per cent to 1,66 per cent in July, and it is expected to rise further.Johannes !Gawaxab, the Chief Executive Officer of Old Mutual Namibia in commenting on the global Brent crude price that rocketed on Monday, said the high prices were eroding economic growth and had the potential of weakening the Namibian dollar, which has seen a strong run and could result in short-term interest rate shocks in early 2006.He called on the Government to put in place a plan to deal with the volatility of international oil prices and their subsequent negative impact on the economy, saying these interventions should be aimed at mitigating against shocks posed by the high prices.!Gawaxab said with inflation going up, it was unlikely that the Bank of Namibia would cut interest rates in October, adding that “if the current inflationary pressures continue, the next move in the short-term interest rates will be upwards in the new year”.!Gawaxab said the forecast by Goldman Sachs – a full-service global investment banking and securities firm – that a global oil price of US$100 per barrel by year-end did not appear implausible, although he noted that opinions about the future direction and impact differed.Namibia has recently been affected by fuel price hikes as an after-effect of the rising oil prices and this has had negative effects on inflation.He also said the oil prices were not only pushing up costs, but also decreasing the demand for goods and services.Individuals’ real disposable income had also been reduced as salaries are adjusted annually and did not keep track of the global fuel prices.”The high fuel price is increasing inflation pressures.In Namibia consumer inflation …is expected to be even higher over the next months as the full impact of the fuel is expected to come through.The local consumer inflation is forecast to be around 4,3 per cent at year-end,” said !Gawaxab.The soaring oil prices have become a topical issue and generated debates worldwide.One of the world’s largest oil companies, Chevron Corp.of the US, was quoted by the international press this week as saying the latest spike would become ultimately unsustainable and the current trend appeared high enough to provoke a response from consumers.While, on the other hand, internationally renowned business publisher Steve Forbes said record oil prices witnessed this week were evidence of a speculative market bubble that was set to burst in the next 12 months.In June, consumer inflation jumped from 1,25 per cent to 1,66 per cent in July, and it is expected to rise further.Johannes !Gawaxab, the Chief Executive Officer of Old Mutual Namibia in commenting on the global Brent crude price that rocketed on Monday, said the high prices were eroding economic growth and had the potential of weakening the Namibian dollar, which has seen a strong run and could result in short-term interest rate shocks in early 2006.He called on the Government to put in place a plan to deal with the volatility of international oil prices and their subsequent negative impact on the economy, saying these interventions should be aimed at mitigating against shocks posed by the high prices.!Gawaxab said with inflation going up, it was unlikely that the Bank of Namibia would cut interest rates in October, adding that “if the current inflationary pressures continue, the next move in the short-term interest rates will be upwards in the new year”.!Gawaxab said the forecast by Goldman Sachs – a full-service global investment banking and securities firm – that a global oil price of US$100 per barrel by year-end did not appear implausible, although he noted that opinions about the future direction and impact differed.Namibia has recently been affected by fuel price hikes as an after-effect of the rising oil prices and this has had negative effects on inflation.He also said the oil prices were not only pushing up costs, but also decreasing the demand for goods and services.Individuals’ real disposable income had also been reduced as salaries are adjusted annually and did not keep track of the global fuel prices.”The high fuel price is increasing inflation pressures.In Namibia consumer inflation …is expected to be even higher over the next months as the full impact of the fuel is expected to come through.The local consumer inflation is forecast to be around 4,3 per cent at year-end,” said !Gawaxab.The soaring oil prices have become a topical issue and generated debates worldwide.One of the world’s largest oil companies, Chevron Corp.of the US, was quoted by the international press this week as saying the latest spike would become ultimately unsustainable and the current trend appeared high enough to provoke a response from consumers.While, on the other hand, internationally renowned business publisher Steve Forbes said record oil prices witnessed this week were evidence of a speculative market bubble that was set to burst in the next 12 months.