BUSINESS MONDAY: Eye on rising oil prices

WHILE government has announced what amounts to some ease for those crying out about the high energy costs, the country still hasto be careful should oil prices reach extraordinary proportions.

This is the view of a local business analyst who spoke of the damage rising oil prices can have on people and on an economy, and why Government needs to curtail some of its expenditure.

Both Government and the private sector say they are not to blame for the increasing prices, and in particular oil prices in Barbados. However, Prime Minister Mia Amor Mottley on Saturday announced that her Government intends to cap the Value Added Tax (VAT) to give some ease to the fuel burden.

This was after making the assertion that the economy had incurred a loss of $2 billion in economic activity.

But the business official, while welcoming the decision, believes that another significant spike in oil prices could create more challenges for consumers and the economy, and says Government won’t be able to maintain the cap.

“The economy is laced with high taxation and you already hear the cry that government cannot afford any major ease to the overall tax burden, which is necessary to finance its operations and meet economic targets,” he told Business Monday.

On this score, he also believes that the Government needs to control its expenditure since it appears it is “throwing money here, there and everywhere”.

Barbadians have been complaining bitterly about high costs, including food which spiralled to about eight per cent during the first three months of this year. High oil prices have been blamed for this by the Central Bank of Barbados.

A recent international report said that crude oil prices have recovered from the COVID-19 slump. That recovery is being driven by increasing demand, production restraint by OPEC and an economic rebound in the USA and in China.

The private sector also believes that along with the above problems, the Ever Given, the ship which was stuck in the Suez Canal, also contributed to high prices.

This current fiscal year Government is anticipating $82.1 million from the fuel tax, which came into being being in 2018 to replace road tax. Actual revenue collected in the financial year 2019/2020 was $85.4 million.

In addition, the country could also see a spike in the outflows to pay for energy imports. That amount was about $510.6 million a year ago.