The private sector is braced for cost of doing business to go up with the Fiji Commerce & Employers Federation (FCEF) yesterday warning of an increase in the cost to goods and services amidst the increase in oil prices overnight as the US-Israeli/Iran war enters its second week and the Strait of Hormuz in the Arabian Gulf, a critical artery to global supply chain, remain closed.
“The price of a barrel of oil jumped up 29 per cent and markets in major trading countries in Asia plummeted as a result. We are now seeing tangible impacts on markets which will ultimately affect the Pacific and Fiji,” FCEF chief executive officer Edward Bernard said in a statement.
“(Overseas) Media reports suggest that the Asian Markets plummeted instantly and the Australian ASX 200 lost more than $94 billion.
“Singapore, the country that all of Fiji’s fuel comes through has already issue warnings to its own businesses and citizens.
“This is the first time in four years that the price has hit over a $US100 per barrel. Some analysts argue we could see record oil prices above $US150 a barrel, if the shutdown of the strait reaches end of March.
“Businesses must be vigilant in terms of investment decisions, employment considerations and ensuring fair prices for consumers.
“Government will need to urgently consider a financial support package for businesses, should the middle east crisis prolong,” Mr Bernard said. Regulators such as the Reserve Bank of Fiji (RBF) and the Fijian Competition and
Consumer Commission (FCCC) are closely watching the impact of the war on crude oil, natural gas, supply chain, freight costs and other commodity prices including food.
In his speech at the State of the Economy Business organised by FCEF last week, RBF Governor Ariff Ali warned that Fiji would lose almost $500million in foreign reserves if oil prices rose from $US60 to $US100, and hinted on the possibility of devaluation if its hand is forced by “instability…high inflation…[and] pressure on our foreign reserves”.
Yesterday, the FCCC pleaded for public restraint to panic buying and fuel hoarding and urged Fijians to “continue with responsible fuel usage”.
ANZ economist for the Pacific Kishti Sen, in an op-ed sent to this newspaper last week on Day Four of the war, when the West Texas Intermediate (WTI) crude was at $US75 a barrel, said while it showed that traders were betting on a shorter duration war, if they were wrong and the conflict escalates, “we could quickly see a larger geopolitical risk premium applied to oil prices” (See Page 14 for Kishti Sen Op-Ed).
“In the event the conflict lasts longer, the greater will be the risk that oil price escalates towards and pushes beyond $US90/bbl mark,” Mr Sen said. He urged policy makers to prepare a plan on how to maintain households’ affordability for groceries and transport costs should that risk materialise.
