World market prices for petrol have jumped to an all time high of $80. This is after moves by the Organization of Petroleum Exporting Countries (OPEC) were largely ignored.
On the 11th of this month OPEC met in Vienna against the background of a tight oil market. After seven hours of debate and persuasive suggestions by the US the OPEC agreed to a 500,000-barrels-per-day increase in production from November.
The next day prices jumped to a new peak of $80 per barrel.
Although OPEC is an oil cartel, its control on the members is not too strong. Iraq and Angola have the freedom to export as much oil as they like or can. But there is infringement of commitments from other members.
A fall in production can be because of obstructions such as strikes, as it happened in Nigeria. But there is also a breach of quotas from members to earn larger revenue. In August, 10 members, excluding Iraq and Angola, pumped about 27 mbd (million barrels a day), 1.1 mbd more than the agreed quotas. In spite of that prices stayed high.
In Sierra Leone it is certain that prices will rise because the price mechanism operated by the petroleum Unit is usually triggered for an increase or decrease when there is a combination of factors (like the exchange rate of the dollar in the local market and the world market price of crude) moving more than 5% either way.
In this case the rise to the record level of $80 per barrel has obviously triggered the price mechanism operated by the Petroleum unit.
This has put the oil marketers in a jam because they are now selling at a lower price when they will have to buy a replacement of the present stock at a very high price.
Therefore if the present price mechanism is maintained, the oil marketers stand not only to lose out entirely on their profit but also forfeit over a billion leones over the next few days.
The issue now is whether the present SLPP led government will be willing to effect a fuel price increase during an election period which does not seem to be favouring them.
It is common knowledge that neither the Trade nor the Finance minister visit their office these days so “who will bell the cat?”
The last price increase was in July 2006 when the pump price for petrol jumped to an all time high of Le13,500.
On 20th October 2006 the world price had fallen triggering another adjustment this time downwards to Le12,950
So it has been almost a year since the country observed a change in the fuel price.