Business
Global Food Prices Set To Soar As The Oil And Gas Crunch Continues
Oil and gas prices have risen dramatically this year as a result of under investment and recovering demand.
·Higher fuel prices are weighing on global food supply chains, with transportation and farming costs continuing to climb.
·The hardest hit will, once again, be those living in developing economies that are still struggling to recover from the impact of the pandemic.
The potential for a knock-on effect of rising fuel prices to be felt by other industries is becoming more likely, as oil and gas prices continue to rise to an all-time high, companies are finding it hard to maintain their costs and may have to shift this burden to the consumer any day now.
Petrol prices have risen higher and higher this year, as oil makes a comeback in 2021 following a difficult year of pandemic restrictions and low demand. This has, of course, been aided by the OPEC+ curbs on production that restricted oil output across member states for the first half of 2021. And while production levels are slowly rising, some countries are finding it difficult to reach new OPEC targets as they revive their oil and gas industries, meaning the global shortage continues.
Looking at the price of gasoline over the last 20 years, you can see that the global average has doubled, from $0.60 a litre in 2001 to $1.20 a litre today. This year, in particular, the increase in demand as economies open back up following over a year of restrictions, added to a supply shortage across much of the world, means prices are nearing an all-time-high.
And it seems that the trend is not over yet, with experts suggesting that motorists across Europe and Asia can expect high petrol and diesel costs well into the winter months as the Brent benchmark stays around $85 a barrel; demand for fuel increases; and taxes on motor fuel in countries such as India, France and the U.K. continue to stay at around 60 percent of the retail price of petrol and diesel. But what does this trend mean for other industries? As well as rising fuel prices, we are seeing the cost of food and drink increase, with average food prices hitting a decade high and costing around one-third more this September than last. Fuel costs cannot be blamed as the sole catalyst in rising food prices, as harvests hit by hot weather and Covid restrictions, an increase in global demand – with a dramatically cold 2020 winter and hot 2021 summer, and disruptions in the supply chain, are also to blame. But if transport and farming costs continue to rise, our food bill is likely to keep climbing.
Kavita Chacko, a senior economist at CARE Ratings in India explains, “High fuel prices put pressure on overall price levels and poses a downside risk to the recovery in mobility and the economy in general.” Moreover, “The rise in transportation costs have been feeding into costs across segments and could be a dampener for consumer spending,” she stated.
With globalisation meaning our food no longer comes from the local farm but is mostly shipped across the globe, as well as the rising price of fertilisers, the food supply chain is finding it hard to maintain stable prices.
Abdolreza Abbassian, Senior Economist at the UN’s Food and Agriculture Organisation’s told Bloomberg, “It’s this combination of things that’s beginning to get very worrying,” “It’s not just the isolated food-price numbers, but all of them together. I don’t think anyone two or three months ago was expecting the energy prices to get this strong.”
But the food supply chain is not the only thing we have to worry about when it comes to the knock-on effect of high oil prices. Any industry that relies on oil for fuel, fertilizers, petrochemicals, or any number of other related products is going to feel the pinch in the coming months, if they don’t already. This means the cost of many of our household products and basic expenses could soon increase.
This ticking time bomb has led Tom Kloza, global head of energy analysis for OPIS by IHSMarkit, to state, “every nook and cranny of the economy” could be affected. “Everything that moves tends to move cross-country by truck or by train, so we’re looking at a more expensive year for that.”
Essentially, anything that is used on freight transportation and any industry that relies on fuel or petrochemicals will likely be affected by the ongoing hike in oil prices. And while consumers are worried about petrol and diesel prices at present, this is just the tip of the iceberg.
The hardest hit will, once again, be those living in developing economies that are still struggling to recover from the impact of the pandemic. With an uneven economic recovery, due to low vaccine rollout figures and Covid restrictions needing to continue across several low-income countries, high fuel prices and the spillover effect on other industries, particularly food, could see governments having to provide economic stimuli to the poorest populations, as well imposing price caps on fuel.
One thing’s for certain, it’s going to get worse before it gets better. Those working in agriculture and industry are already taking the hit and it’s only a matter of time until this price burden is shifted to the consumer, not only at the pump but across a multitude of areas of our daily lives.
Bradstock reports for Oilprice.com.
“Payment of tuition fees for undergraduate/postgraduate studies shall be subject to a maximum limit of $25,000.00 per semester,” the Manual states.
The expansion of international card limits also reflects growing confidence among lenders that foreign exchange liquidity has improved enough to support retail dollar transactions.
Speaking recently at the BusinessDay 14th Annual CEO Forum in Lagos, CBN Olayemi Cardoso, governor of the CBN said buying and selling activities now increasingly determine outcomes in the foreign exchange market, unlike in the past when market participants relied heavily on routine Central Bank interventions.
According to Cardoso, Nigeria’s net foreign exchange reserves have risen from just over $3 billion at the start of the reform programme to more than $40 billion, while gross reserves have climbed to about $52 billion, providing stronger confidence for investors and enabling the Central Bank to reserve interventions for periods of market stress rather than day-to-day liquidity management.
The restoration and expansion of international naira card spending limits are increasingly being seen as one of the clearest signs that the benefits of the CBN’s foreign exchange reforms are beginning to reach households, students and businesses making legitimate cross-border payments.
The Secretary-General and Chief Executive Officer, WEC, Dr Angela Wilkinson, disclosed this in a statement, last Thursday.
“Nigeria’s participation comes at a pivotal time as the country seeks to expand energy access, strengthen energy security, accelerate gas development and mobilise the capital required for industrialisation and sustainable economic growth.
“WEC Nigeria will convene leaders from across the energy ecosystem, apply the WEC’s globally recognised Energy Trilemma framework to Nigeria’s unique context, and promote evidence-based dialogue, practical collaboration and informed policymaking.
“It will also ensure that Nigerian and broader African perspectives contribute meaningfully to global energy conversations,” she said.
Wilkinson expressed confidence that Nigeria would play a significant leadership role at the World Energy Congress scheduled for Riyadh in April 2027 and beyond.
The statement also quoted the Chairman of WEC Nigeria, Isa, as describing the country’s participation as an opportunity to deepen national and African leadership within the global energy community through practical solutions tailored to regional development priorities.
He said the platform would promote collaboration across sectors and attract sustainable investments into Nigeria’s energy sector.
The Chief Executive Officer of WEC Nigeria, Wunti, was quoted in the statement as saying that the council would connect leadership, evidence and investment to build a secure, affordable and sustainable energy system.
“This system will be capable of driving economic growth and shared prosperity.”
According to him, the platform will also connect Nigerian institutions and businesses with international knowledge, technology, partnerships and investment opportunities through the World Energy Council’s global network.
Recall that WEC, founded in 1923, is the world’s oldest independent and impartial community of energy leaders and practitioners, advancing informed, collaborative and practical action across the global energy system.
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