World markets, mainly those linked to the energy and hydrocarbon sectors, remain in turmoil after Russia’s military attack on Ukrainewhich will have direct consequences on fuel costs in Nicaragua, analysts warn.
Nicaragua’s problem is aggravated as the pockets of Nicaraguans deal with the fact that fuel prices in the country face rising prices for five consecutive weeks.
In addition, when the threat of the military conflict in Ukraine was not yet latent and the prices of oil and derivatives worldwide were at a low point, the Daniel Ortega regime kept national fuel prices frozen for more than two months. During that time, the international value of crude fell to almost $20 per barrel, but there was not a single downgrade in Nicaragua.
“The problem is that the international prices of oil and its derivatives are directly affected when geopolitical situations occur, such as the one in Ukraine. This is out of our reach, but it will have a strong impact on us because the oil companies in Nicaragua are the ones that set the prices, which are not regulated by the State,” explained engineer Patricia Rodríguez, a specialist in hydrocarbon issues.
Currently fuel prices in Managua are 44.39 cordobas per liter of super gasoline, averaging 168 cordobas per gallon. The liter of regular gasoline is priced at 43.36 cordobas per liter, and 164.12 cordobas per gallon. Diesel, the most consumed fuel in Nicaragua, has a price of 40.10 cordobas per liter and 152 cordobas per gallon. In the departments of the country these amounts are higher, due to the addition of distribution costs and other expenses.
“Oil prices are difficult to predict, especially when they are affected by geopolitical factors. So in countries like ours, in which we depend on international oil prices and without regulation as such by the State, without a doubt what can be expected is that prices will rise and it will impact us terribly,” Rodríguez added.
Barrel of crude touched the 100 dollars
Russia is a dominant exporter of crude and natural gas, particularly to Europe, with some of its supply transiting through pipelines in Ukraine. The price of intermediate oil from Texas (WTI) —a reference for Nicaragua— closed this Thursday on the New York Stock Exchange at 92.81 dollars a barrel, after touching 100 dollars in the morning due to the Russian offensive.
The price of WTI, which remains at levels not seen since 2014, moderated over the hours as, according to some analysts, the supply of oil and natural gas has not yet been affected by the military escalation.
Texas has been on the rise for several days due to the escalation of the conflict, taking into account that Russia is the second largest oil exporter after Saudi Arabia, as well as the largest producer of natural gas.
Rodríguez pointed out that “the impact should be quite strong, not only in fuels. We are still quite dependent on energy generation based on bunker fuel oil, in addition to an increase in transportation costs. The industrial sector operates a lot with petroleum derivatives as well”.
“Unfortunately, the other situation is that when these upward spikes in oil prices occur, they take a long time to go back down. The increases are maintained for a long time and that aggravates the impact”, he added.
Russia dominant exporter
An analysis published this Thursday by the newspaper Washington Post highlights that world markets in the wake of the military escalation in Ukraine entered a period of uncertaintymainly in the electricity sector.
Although the Russian incursion is just beginning, signs suggest that a wide-ranging military offensive would trigger deep sanctions from the United States and the European Union, harming not only the Russian economy, but that of the entire world. analysis of post.
“Consumers around the world are already facing widespread price increases linked to runaway inflation and troubles in energy markets, and now the pains are likely to become more acute,” he adds.
CNN reported that Russia produces about 9.7 million barrels per day according to 2021 figures. This figure is the second after the United States and represents more oil than that produced by Iraq and Canada combined.
The American chain also reported that the financial services company JPMorgan warned that if any flow of Russian oil is interrupted by the crisis, oil prices could easily reach $120 a barrel.
“In the unlikely event that Russian oil exports are cut in half, crude oil would skyrocket to $150 a barrel”, reported JPMorgan.
The renowned Argentine journalist Andrés Oppenheimer warned in his opinion column published in the newspaper El Nuevo Herald this Wednesday the serious economic consequences for the countries of Central America and the Caribbean of the Russian invasion in Ukraine.
“This is already creating a huge financial problem for the Caribbean and Central American countries, most of which are oil importers. And it is hitting the Caribbean countries especially at a time when they are still recovering from a sharp drop in tourism due to the covid 19 pandemic. It is a serious problem,’ says Juan José Daboub, former Minister of Finance of El Salvador and Former Managing Director of the World Bank. Most of the Caribbean countries had planned their budgets on the basis of oil $50 a barrel this year”, quotes Oppenheimer in his column.
“With oil prices almost double that level, most Caribbean and some Central American countries will have to increase their national budget by at least 20% this year. This means that they would have to buy oil with funds that they previously thought to allocate to health, education or public works”, adds the analysis.
Venezuela could regain its predominant role
Oppenheimer quotes Roger Noriega, former head of the Western Hemisphere office of the State Department and current advisor to the government of the Dominican Republic, who explains the risk that this oil shock will be exploited by US adversaries.
“Russia, China, Venezuela, Iran and other US rivals can take advantage of scarce energy supplies to gain influence in the Americas.” Washington should get ahead of this problem today, before it’s too late,” Noriega said.
Venezuela, which used to be a major exporter of subsidized oil to Caribbean and Central American countries, has seen its oil production plummet in recent years due to corruption and disastrous management by its government.
“If President Joe Biden does not pay attention to the looming oil crisis in Central America and the Caribbean and helps these countries obtain emergency loans from international financial institutions, Nicolás Maduro will try to fill that void. It would not be the first time that Venezuela has done so, or that the region’s oil importers have been forced into their hands,” Oppenheimer wrote.
The European Council agreed on Thursday new restrictive measures that will impose “massive and severe consequences on Russia for its actions,” reported the Spanish newspaper El País.
“The sanctions cover the financial sector, the energy and transport sectors, civil and military dual-use products, as well as export control and financing and visa policy,” the publication cites. The United States is also preparing a strong package of sanctions to hit the Russian economy.
