Faced with high volatility in the world price of crude oil, characterized by a new cut in production in OPEC member countries (Organization of Petroleum Producers and Exporters), the Dominican Republic is subject to maintaining the subsidy to continue contributing to the inflation control in the local market.
Yesterday, after 4 in the afternoon, the price of a barrel of West Texas Intermediate (WTI) oil, which is listed on the New York stock market, was worth US$79.81, one dollar and three cents more than the previous day, but also very close to the increase registered in April. At 5:30 am, WTI was worth US$80.09, US$1.31 more (1.66%).
The same rise is registered by the Kurdish Brent, which is listed on the London market. Yesterday the “commodity” rose to US$83.86, for an increase of 94 cents compared to Wednesday’s price, equivalent to 1.13%. The increase in oil is one more ingredient of pressure for public finances, because in addition to increasing the value of the country’s imports, it forces a high subsidy to be maintained both in weekly fuel prices and in electricity service.
Bloomberg’s daily price report indicates that gasoline also rose 150%, heating oil by 251% and diesel by 3.48%, which also becomes one more ingredient of pressure for the country that is an importer net of the so-called white fuels, that is, the refined ones. International press reports attribute the following comment to UPS analysts:
“We see the oil market undersupplied. We maintain a positive outlook and expect Brent to rise to $85-$90 in the coming months.”
They hope that on August 4 the main OPEC+ ministers will meet to analyze the market situation.
For the economist Henri Hebrard, today, for the first time since April 18, a barrel of oil reaches US$80 and “this marks a very clear recovery after having fallen to its lowest level of the year of US$66.74 on March 17, 2023. ”.
He pointed out that, despite the rise registered in the past few days, the barrel of oil is still slightly below the level of US$80.26 that had closed the year 2022, he explained.
For Hebrard, the current price of gasoline in the international market is what explains why any possibility of a reduction in local prices in the short term has vanished.
“In fact, the benchmark weekly average for next weekend rose very strongly again, going from $112.30 last weekend.” According to the explanations of the fuel expert, the barrel of gasoline is at its highest level since October 2022 and therefore if today’s price (US$124.07) is taken into account, gasoline has suffered a huge increase of US$20.77 since the beginning of the year 2023 (equivalent to +20.1%). Hebrard affirms that the price gap between gasoline and oil had closed at US$23.04, and is now at US$44.15, which means that it has practically doubled.
The price of gasoline goes up
The economist Hebrard estimates that local gasoline prices correspond to an unsubsidized price equivalent to about US$103 per barrel, “so we are now about US$21 per barrel above that.
It is estimated that for each additional dollar in a barrel of gasoline, the price must be raised or the subsidy increased by around RD$1.60 to RD$1.80 per gallon, says Hebrard.