The falling price of a barrel of oil is moving away from the lower average of the range established by the Government to subsidize domestic prices of fossil fuels.
The trend seems to be announcing the end of subsidies and static prices since last March 4, from when the Government accumulates more than RD$28.8 billion in subsidies.
Yesterday, Monday, Texas crude, the benchmark for the local market, closed with a drop of 2.6% and stood at 76.71 dollars, thus continuing below 80 dollars a barrel after the bump it suffered last Friday.
Last week the Government was quick to say that the drop in the cost of “black gold”, which lowered the WTI average to US$84.67, a level similar to that of the reference crude oil when the Government began the program announced the launch of the subsidy program to combat increases.
“Much has been said these days that fuels in the Dominican Republic should go down because the reference oil price, WTI, has done so. In fact, letting the market flow would have meant that this Saturday premium gasoline should increase by 3.28 pesos per gallon,” said the Vice Minister of Industry, Commerce and MSMEs, Ramón Pérez Fermín, on Friday.
And he added: “Leaving the market without a subsidy would have meant that regular gasoline should have increased by 6.46 pesos per gallon.”
When the Government announced the measure in March, which was accompanied by other provisions, it reported that it would assume a minimum fiscal sacrifice of at least between 600 and 1,000 million pesos per week, which would be between 2,400 and 4,000 million pesos per month, and between 9,600 and 16,000 million pesos during the four months of application of the subsidy.
Oil did not allow him to limit himself up to that point for a while, because before four months had passed he had already surpassed those amounts.
From the week of July 16 to 23, the Government was able to begin the “slow decline”, by then providing a subsidy of 900 million pesos, and for the week of July 23 to 30 it was reduced to 660 million.
Subsequently, for the section between July 30 and August 6, the subsidy was 550 million pesos and for the week of August 6 to 3, it was reduced to 450 million pesos.
Then, for the week of August 13 to 20, he lowered it to 198.4 million, and in the week of August 20 to 26 he arranged for it to be 300 million.
Closing on the NY Stock Exchange
Yesterday the price of Texas Intermediate Oil (WTI) fell by 2.6% and stood at 76.71 dollars, thus continuing below 80 dollars a barrel after the bump it suffered last Friday.
At the end of operations on the New York Mercantile Exchange (Nymex), WTI futures contracts for delivery in November subtracted 2.03 dollars from the previous close.
Investors are once again concerned about the threat of a global recession and the interest rate hikes announced by different central banks. The US benchmark oil on Friday fell 5.7%. On Monday, the US dollar rose to a high not seen since 2002, which is not in the US black gold’s favour, making it less competitive.
Fears of a possible global recession
According to reports released yesterday, at the end of the day on the New York Mercantile Exchange, the fear of a possible global recession became more palpable among investors after last week the United States Federal Reserve (Fed ) raised interest rates by 75 basis points and moved to a range between 3% and 3.25%, the highest level in the last 14 years.
Likewise, the Bank of England raised interest rates in the United Kingdom by 0.50 percentage points, to 2.25%, its highest level since December 2008.
However, as reported, many bullish factors remain in play, such as the war in Ukraine, the blocking of the nuclear deal with Iran that is linked to the return of Iranian oil to international markets, and the possibility that OPEC countries reduce their pumping at a time of tense balance between supply and demand.
Natural gas futures for October added 7 cents to $6.90, and gasoline futures due the same month gained nearly 1 cent to $2.38 a gallon.
