The rise in crude oil creates acomplex situation for the economy, basically for lower-income families who will experience higher inflation.
With a price of US$85 per barrel of oil, the Dominican Government will have to seek an additional US$1.5 billion this year compared to 2021 to cover the oil bill, explains the economist Henri Hebrard.
Total, the oil bill will reach US$5,500 million this year 2022, which is why the also specialist in energy issues suggests that the Government present a new complementary budget to bring clarity to the population.
Considers “complicated” the impact of rising oil prices. Hebrard claims that the Government will obtain RD$10,000 million for the Advalorem tax to hydrocarbons, resources that can be used in the subsidy for liquefied petroleum gas (LPG) and diesel.
The tallest
The expert recalled that the highest peak of the oil bill it was in between 2010 and 2012, when, according to data from the Central Bank, recorded a record level of US$4,789.1 million, to later close in December 2012 with the highest level, US$4,789.1 million.
This is equivalent to 56.4 million barrels with an average price of US$84.81 per barrel for the import basket of the Dominican Republic. For reference, that same year 2012, the average price of West Texas Intermediate (WTI) oil was US$94.15/barrel.
In 2012, Dominican customs reported imports worth US$4,953.0 million in chapter 27, which corresponds to hydrocarbons (it also includes coal imports, which is why it is generally slightly higher than the BCRD figure), he explained.
He said that andCrude oil reached its lowest point in 2020 when the BCRD’s oil bill was US$2,017.6 million, equivalent to 58.8 million barrels for a (very low) average price of only US$34.33/barrel and a WTI oil benchmark of US$39.32/barrel on average.
For the economist it is important to remember that the 2022 Budget was approved based on an average value of WTI oil of just US$62.70/barrel, that is, it is already US$25 below today’s prices.
Impacts
“Clearly, all this has a first important impact on the balance of payments: around US$1.5 billion additional to what was paid in 2021 will have to be sought, as long as oil does not continue to rise above US$85,” he said. .
For every additional dollar that the price of oil rises, it will cost the country about US$80 million. more in annualized terms, which multiplied by the exchange rate of RD$58/US$ (to round off), is equivalent to some RD$4.6 billion that must be taken out of the economy for each additional dollar that oil prices rise.
At the fiscal level, this implies impacts that are also important for the government, he indicated.
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