Thursday , August 11 2022

Hydrocarbons: Reasons for price hikes for gasoline and diesel


The government adopted a pump hydrocarbon price adjustment plan on Thursday, November 8, Lines of gasoline and diesel will see an increase of 75 CFA francs from the pump on Friday, November 9, 2018. The price of butane gas does not change. A fair increase in the evolution of prices in international markets.

The problem of petroleum products is becoming increasingly important as it affects the structure of production costs and the behavior of macroeconomic aggregates. If the price of the pump stays in Burkina Faso since May 2016, it is only two years later that the government made great efforts through government subsidies.

In fact, while this price is static in the pump market, oil acquisition costs have steadily increased in international markets. From May 2016 to May 2018, Brent oil prices rose 66.04 per cent to $ 77.13 per barrel from 46.45 per barrel. %. Brent was $ 82.09 in October 2018, up 76.77% from May 2016.

Meanwhile, the US dollar has evolved sporadically between May 2016 and May 2018, with a slight decline from an average of 4.78 CFA francs.
As a result, there is a shortage of petroleum products worth 73.92 billion CFA francs as of June 30, 2018.
Like other countries in the subregion, the price of hydrocarbon in Burkina Faso is based on an average of two key variables: the Baril de Brent price and the US dollar exchange rate.

The oil price of the pump in a month [n] It is fixed based on the average of the first 25 days of the month. [n-1] Brent's barrel in international markets and the price of US dollars, the reference currency for purchases. From this extrinsic information to the national situation, the moon's price structure is discontinued.

Because of our isolation, we need to consider shipping and shipping costs to move our products from coastal deposits to inland deposits.

The state provides subsidies to support the difference between the actual price in the market and the price displayed on the pump in order to curb the price of the pump. The larger the gap, the higher the subsidy level.
Today, the country is receiving 14 billion CFA subsidies per month due to rising international market prices.

These subsidies include SONABEL fuel prices, DDO prices for bakeries, butane gas prices and pump prices for Super 91 and diesel fuel.

Sonar Bell fuel subsidies enable sustainable prices per kilowatt hour per population.
The country has a CFA of 134 CFA per liter of Super 91 sales and 170 CFA francs on Gasoil liter. SONABEL fuel (fuel oil and DDO) averages 242 CFA francs (per liter) and the butane gas price is 337 CFA francs (kilograms).

The current subsidy requirement is about 14 billion CFA per month. CFAF 8 billion for pump prices, CFAF for SONABEL fuel, and CFAF 3 billion for butane gas.
From 2017 to today, this subsidy will accumulate debt to SONABHY of 240 billion CFA francs.

The subsidy to keep the pump price below the actual market price is high enough that the country can not afford it. This situation has caused a huge debt to SONABHY, which could jeopardize our country's normal supply of hydrocarbons. As SONABHY's account had a debt level of 134 billion CFA francs at the end of June 2018, the bank was not yet ready to grant additional credit for higher balances.

The cumulative amount of national debt has become unbearable, especially as other priorities of the National Economic and Social Development Plan (PNDES) are waiting for funding. This has added to the strong social demand and the impact of the government's commitment to specific workers on labor union demands.
In this case, there are two options to ensure the continuity of service and thus to adjust the price to ensure availability of the hydrocarbons, or to keep the price at the risk of clogging. Trends are maintained internationally.

It is therefore the government's goal to reduce the impact of subsidies allocated to the consumption of customers whose government appears to be costly.
Nonetheless, this increase is not intended to completely eliminate state subsidies on petroleum product sales.

It will be proportionate to avoid exposure to soaring prices in international markets.

The subsidy is maintained at the selling price of SONABEL to avoid an upward adjustment of the kilowatt hour cost. Subsidies are also maintained for gas prices.

It should be noted that the government will take steps to ensure that this increase does not have a significant impact on products, especially consumer goods, through consultation with the supply chain and marketing staff.

Ministry of Information and Communication / Prime Minister (DCI / PM)

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