Increasing Petroleum Price Could Overshadow Liberia’s Pro-Poor Agenda
Report by Alpha Daffae Senkpeni, [email protected]
Monrovia – The surge in oil price on the world market is hitting Liberians hard as the national oil refinery company calls on people to brace for the worse after increasing the price of petroleum.
The increment comes at a time when the CDC-led government is propagating its pro-poor slogan with the aim of making the interest of ordinary Liberians a priority.
Economists say since the price of petroleum products influences the price of several major commodities; the government must make timely interventions to avert acute inflation on the local market.
But government regulatory bodies for the sector are showing what appears to be a laissez-faire approach, stressing that the increment is based on global factors.
Why Global Increment?
On Thursday, May 17, the price per barrel hit US$80; the highest in over three years. And industry experts are attributing the increment to the political rigmarole between US President Donald Trump and Iran over the United Sates’ decision to withdrawal from the nuclear deal.
British newspaper, The Independent, reported Thursday that the resumption of sanctions on Iran has raised concerns over supplies.
There are also concerns over the collapsing Venezuelan oil market amid presidential election and a deepening diplomatic feud between Washington and Caracas.
Fears that supplies could be dwindling have pushed the price of oil up, with some traders now speculating that brent crude could hit $100 a barrel, reports the Financial Times.
Liberia Upped Petrol Price
In Liberia, the government has increased the price by US$0.20: retail price of a gallon of gasoline is now US$3.61, while fuel is US$3.70.
However, the uncontrolled exchange rate between the US and the Liberian dollar is making the price unstable as some retailers are selling a gallon for LD$500 in Monrovia, Paynesville, Brewerville and other cities near the capital.
In the counties, there are price variances that are as high as LD$600-LD$700 and locals are now bearing the brunt of raise in the prices of other major commodities due to hike in the transportation fare.
The new prices are creating more uncertainties for the local economy while the exchange rate remains unstable despite the Central Bank’s insistence that it has a fixed exchange rate.
The Liberia Petroleum Refining Company (LPRC) argues that the situation is a global problem that cannot be determined by the Liberian government, citing that prices in Liberia are “little bit lower as compare to the prices in other countries in the sub region”.
“The price increment is not intended to generate taxes, it is affected because of the global prices – it’s not that government is trying to gather an extra tax that is why the prices of petroleum have been increased,” says William Morris, LPRC Assistant Public Relations Manager.
However, there are suggestions government can either subsidize the price or give tax incentives to importers to alleviate the pressure on consumers.
One economist, who asked for anonymity, said “the petroleum price hike is explained by two factors that are acting at the same time – exogenous price hikes caused by developments abroad and the depreciation in the exchange rate between the Liberian and US dollar.”
“The government could take a slew of policy measures to reduce the rate of pass-through of the external price hike on the market. Providing tax incentives to petroleum importers could be one of them,” he said.
“However, this also comes with cost in the form of revenue foregone that may already be going to addressing “pro-poor” expenditure demands. Provided the global price hike is temporary and one-off, this strategy could prove logical in the short run. However, if the global petroleum price is on an upward swing, this option may not be sustainable as it will be more difficult for the government to support the price at “pro-poor” levels.”
Meanwhile, the LPRC says government is incapable of giving subsidy because it inherited a “broke economy and cannot even promise you right now that it will subsidize the retail price”.
“What is happening on the world market with the price will affect us directly, all we can hope for is that it (price) comes down, if it doesn’t come down, we will continue to carry the price up and then maybe the higher authority will decide how to handle it,” Morris warns, while declining to comment on the feasibility of granting tax incentives to importers.
The Ministry of Commerce and Industry (MoCI) and the Liberia Revenue Authority are two government agencies that could possibly weigh in on the benefits of entering a concession with importers to cut the pump price.
For the commerce ministry, it appears to be improbable to consider measures that would see the government reduce the retail price.
“Government, one-way-or-the-other, is subsidizing the price that is why we see the price at the level it is now. It could have been more than that but because of the subsidy we have what we have now,” says Jones, PR Officer of the MoCI. But he failed to mention the details of the subsidy government is providing.
The ramifications of the new price are now visible across the country as transportation fares skyrocket, impacting the prices of several basic commodities.
Retailers Feel the Brunt
Meanwhile, several grassroot petroleum retailers are now struggling to grapple with the new prices; some are terming it “troublesome” while others have already lost their small investments.
Hassan Sheriff, a gasoline dealer at Stephen Tolbert Junction in Gardnerville, is afraid that the increasing “price may get out of hand very soon”.
“The decision to increase the price of petroleum is really affecting us the small business holders,” he said.
“With our low capital, it is impossible to compete with large business owners, so you see all this price increment will affect us negatively we the ordinary people who are looking for our daily bread.”
George Dolo is a self-supported student who survives on retailing gasoline in the commercial district of Red Light in Paynesville City. He is worried about the increasing price and the unstable exchange rate.
“As you can see I just came from buying a gallon of gas from Total at a price of LD$500.00 excluding transportation, so we are just selling to at least maintain our customers,” he says.
“So, I am appealing to the government to get this US rate under control because we the marketers are finding it difficult.”
Henry Bainda claims importers are taking advantage of the situation because they benefit from the new price decided by the government.
“Each time we go there to buy gas they will tell us that LPRC controlling the petroleum business in Liberia and not them. So, we are just calling on the government of Liberia to do something about this increment because everybody – from gas dealers, drivers and even the ordinary people – will feel it.”
Reporters Jackson Kanneh and Al-Varney Rogers Contributed to this story