Gov’t Nervous: As Oil Price Hits Record High
Though media reports last week, said government is unlikely to increase fuel prices, in response to soaring world price of crude oil, which has at the time of going to press, shot through the $40 per barrel roof, Public Agenda has gathered from a highly planned source in government, that the matter is not as simple and easy as might have been portrayed in the reports. The government is deeply troubled about the situation, and has in fact become jittery over its earlier decision not to pass on the extra cost to consumers.
Presently, government is subsidizing crude oil imports to the tune of ¢70 billion every month. The figure could escalate further should the trend on the world market persist.
It appears that, in spite of government decision to deregulate the petroleum industry, it is hesitant about letting the market decide, this time around. “The stakes are high”, said a source at the Ministry of Energy. “Any increase in fuel prices at this time, will be suicidal for the NPP at the polls” he explained. A survey conducted by Public Agenda over a three-day period, last week, has confirmed that, an upward adjustment in fuel prices could hurt the electoral fortunes of NPP.
Half of the 48 sampled opinions, said an increase in fuel prices at this time would influence their vote at the 2004 elections, 20 said it wouldn't, and 4 were not sure. Thirty-two of the respondents said, though their economic situation has not improved since the NPP came to power, they would still give the party their votes. They explained that, 4 years is too short a time for any government to turn an ailing economy around.
It appears from the survey, that the NPP still enjoys some amount of goodwill among the electorates, but the government is not taking chances. The decision as to whether or not to adjust petroleum prices has become more of a political question than technical. It is not too clear, the extent of the independence of the National Petroleum Tender Board in matters of this nature.
Some economic policy analysts Public Agenda spoke to, expressed that view that, government withdrew its current subsidy of E70 billion a month, and used the resources to support is poverty reduction programme. They argued that, more hospitals and schools could be built with the freed resources. The suggestion is however countered by pro-poor civil society organisation, who maintains that, the withdrawal of the subsidy will mean an immediate increase in petroleum prices, which, according to them, will impact negatively on general price levels, and in the process, erode any gains from the government's fiscal policies. Such a move, they say, will compound an already miserable state of existence for the country's poor.
But, the executive director of ISODEC, Charles Abugre says, “The thing to do is to conduct a serious scientific study that assesses the overall impact of fuel prices increase on the economy.” Speaking to this reporter, in a telephone interview, he explained that, there is the need to move away from “this narrow focused, short term view of the impact of fuel price increase”.