In the first week the price is 25% higher than the projected average for the full year
The high cost of oil was during the end of 2021 the most unmanageable economic variable for the Government, and for the recently started 2022 it threatens to continue creating problems for the official goals.
Completed the first two weeks of the new year, the rising price of black gold has been all the time above the average projected by the Government for the entire period, consigned in the General State Budget (PGE) 2022.
Since the beginning of the new fiscal period, the price of oil was well above the estimate by the designers of the budget, repeating with greater force a behavior that also occurred during the end of 2021, when the price of crude exceeded by more than 50 percent the projected average cost for the entire year.
History seems to be repeating itself. At least the year has started reflecting that possibility. Crude prices are already around 25 percent above the estimated average for the entire period, and the international market has been heavily impacted by political conflicts between producing countries in the Middle East.
For the year 2022, the projection of the average price cited in the PGE 2022 is US $ 62.7 per barrel, an estimate based “in part, because it is expected that the effects of the dynamism of the economic reopening begin to normalize for” the current year .
On Friday, in a lower close after crude oil had hovered around US $ 80.00 per barrel, black gold closed down 0.7% to $ 78.90, with a market very aware of political instability in Kazakhstan.
According to data at the end of trading on the New York Mercantile Exchange (Nymex), WTI futures contracts for delivery in February cut 0.56 dollars compared to the close of the session on Thursday. Despite the slight decline on Friday, US benchmark oil closed the week with a 5% revaluation due to geopolitical events that have put the energy supply at risk.
The main one has been the political instability in Kazakhstan, a member of OPEC +, where there were protests that led to riots, with the taking of government headquarters in several cities. The oil company Chevron said that part of the supply in the Central Asian country’s largest field, Tengiz, had been interrupted because of transportation problems stemming from those protests.
On Friday, and after the arrival of Russian troops to the city of Almaty, the Kazakh authorities assured that order had been almost completely restored.
Also a major factor was the reduction in Libyan supply, which has dropped from more than a million barrels a day to about 729,000 due to maintenance, the experts added.
On the other hand, natural gas contracts for delivery in February totaled more than 10 cents, to $ 3.92 per thousand cubic feet, and gasoline contracts due the same month remained at $ 2.30 a gallon.
Scenario for RD
The general energy and oil scenario in particular is acting contrary to the forecasts contained in the PGE 2022 because the price of black gold is cited among its main macroeconomic assumptions.
Already the Dominican economy has been dragging the recent bad move that oil made in 2021, when it was expected that the price of crude would close at an average of US $ 65.9 per barrel, above the US $ 45.5 initially estimated for this year. The actual closing exceeded US $ 70, mainly due to the higher general demand for transportation of raw materials.
The Dominican Republic demands about 155 thousand barrels per day of petroleum-derived fuels, and the price of crude oil also affects the national budget, both in income and expenses. The second largest contributor to tax revenues, the fuel tax, is directly linked to the price of crude. But there is also an element of fiscal expenditure related to the price of oil, subsidies to fuel prices. During 2021, the Government assumed debts with importers for some RD $ 13,000 million, so as not to transfer all the increases in crude oil and its derivatives in the international market to fuel prices. The debt was paid in full, according to the Government through the Ministry of Industry, Commerce and Mipymes. However, for the second business week of the current month, and of the year, the Government already assumed a debt with fuel importers amounting to RD $ 222.0 million, so as not to transfer to consumers all of the increases raised by the behavior of the international market.
Because it is the most important variable in terms of impact on the country’s trade balance, oil and its price lead the attention of the economic authorities, due to its impact of unbalancing the figures and throwing projections overboard.
In addition to crude oil, other macroeconomic assumptions taken into account in the budget design are, the expected growth of the gross domestic product, the inflation rate, the exchange rate and the price of gold.
The behavior of these indicators, except for the price of oil and the rate of inflation, has been favorable for the Dominican economy. The exchange rate tops the list of positive performances. For the past 2021 an average of RD $ 62.30 per dollar was projected and it was an average of around RD $ 57.82 per dollar.
By 2022, the Government said that the evolution of prices in the economy is expected to continue to be highly conditioned by the external and internal effects affected by the “temporary” imbalances that have given rise to inflationary pressures in agricultural goods at the national level and in food goods globally.
