Travel, eat and spend less

May 25, 2018 Features / Columnists, Peeping Tom

The rise in fuel prices at local pumps is just the latest sign of Government’s misunderstanding and indifference towards the problems, which are being faced by the small man. In other parts of the world, there would have been calls for resignations over the failure of the government to cushion the recent increases.
Petrol was retailing at between $229 and 240 per litre this week. Oil prices have spiked by more than 20% since the start of this year but this increase is likely to slow as OPEC begins to increases production to offset supply concerns.
The increases in the global price of crude are being felt locally. It has resulted in increased acquisition costs but this does not mean the prices at the pump are justified.
The increased acquisition costs are on account of higher oil prices which have increased the fuel import bill of the country. But the government should have been cushioning this increase mindful of what it will do to prices in the economy at a time when businesses are slowing.
Guyana’s Carnival may sidetrack persons from appreciating the gravity of the economic crisis, which is unfolding in the Republic. But as specious as its sound, the best gauge of increased cost of living is food. For weeks now, there has been an increase in the cost of food at Chinese restaurants across the country.
A good way to know whether prices in the market are increasing is to examine the cost of food at Chinese restaurants. These restaurants tend to keep their prices stable and only raise prices when it cannot be avoided. A few weeks ago, the prices for food and many Chinese eating houses were increased, signaling that regardless of what the IMF says about inflation, there has been an appreciable increase in prices of food in the economy.
The increase in the price of fuel will make things worse because transportation operators are edgy. They are looking towards the government to try to cushion the effects of the petrol price increase in the same manner that Ashni Singh had done when he was Finance Minister.
He had implemented a sliding scale of subsidies, which allowed for the government to reduce the taxes as the acquisition cost of petrol went up. This allowed transportation operators to not feel the full impact of upward fuel prices movement.
When oil prices rise, Governments collect more taxes. The previous government had channeled some of that money back into the hands of the public by using it to subsidize the cost of fuel at the pump.
With the APNU+AFC now back in a cozy relationship with the World Bank, there may be a reluctance of the present government to try to cushion the effects of the present increase in petrol prices which as stated before tends to have a multiplier effect on process in the entire economy. The World Bank is known to discourage the use of subsidies in an economy and this may explain the indifference, which is being shown by the present APNU+AFC Administration towards what is taking place at the pump at present.
The government will be earning more taxes because of the increases in acquisition costs. It should pass on these increased taxes to consumers by cushioning the prices at the pump. It can do so in the same way that Ashni Singh did when he was Minister of Finance.
The longer the government waits to act the greater will be the temptation for transport operators to higher transportation costs. Right now consumers cannot afford such increases.
In addition, the transportation operators have no moral authority to increases fares because when prices fell last year and earlier this year, there was no decrease. However, do not tell that to these operators. They are clamouring for an increase in fares unless the prices at the pump decrease.
The other alternative would be for people to travel less, eat less and spend less.

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