Oil prices inching towards $100 a barrel can be welcome news for anyone in the Sultanate of Oman, but it raises concern about the inflation, especially of prices of food products, including vegetables and fruits, that are imported from different parts.
As per the official statistics, the average price of Oman crude recorded an increase of 39.7 per cent at the end of last December compared to the same period in 2020, as the price rose from $46 per barrel to $64.3 per barrel. On Tuesday, Oman crude prices traded at $93.39 per barrel.
On Monday, world oil prices rose above $96 per barrel before scaling back on Tuesday as Russia slightly softened its position by scaling back troops.
“Prices are the highest level since 2014, which could make world’s inflation problem even worse’’, according to experts.
Oil prices may have a limited impact on transportation costs in the Sultanate of Oman as the government has ordered a cap on fuel prices at October 2021 rates until the end of 2022. The government would bear the cost difference that may result from any potential increase in oil prices.
But according to experts, energy prices have been affecting inflation rates due to high transportation costs in many countries, which is then transferred to goods that are imported from these markets.
According to National Centre for Statistics and Information (NCSI), the biggest casualty of any inflation surge will be on prices of fish, fruits, vegetables, and oils (around 27.5 per cent), bakery and other food products (around 5.5 per cent).
On a positive note, a senior market-based analyst in the Sultanate of Oman told the Observer: “The surge is very good for the Omani economy as it will help the government to cut the deficit as the economy is still dependent on revenues from the oil and gas sector. It will also help accelerate government spending on various infrastructure and social projects that will help to generate job opportunities and subsequently boost consumer confidence.”
But the word of caution is that prices such as $100 per barrel can slow down the economic growth or recovery in oil-importing economies.
@vinod_nair
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