Inflation: fuel prices on the verge of reaching 3000 ariary

The good news on the political plan wrongly forecasted an economic improvement in Madagascar. The fuel price increase, however, was quick to recall that the crisis is not over yet. The Shell company is the first to raise the prices of a couple of its products. Premium, actually simple common fuel, shoots up to 2950 ariary against 2720 in July. The rise is slightly more important for common gas or SP 91, plus 250 ariary per liter to reach 2930 ariary.

The excuse for the renewed consumer price increase is still the same old one. Once again, the combination of two current factors is made responsible: on one hand the value drops of the ariary, and on the other hand, the shooting up crude oil course on the international market. In October, the national currency dropped against the dollar, at that time worthing 2010 ariary. The bogged down political crisis, the suspension of the foreign funding, and the slow down of foreign investments drove the foreign currency offer down on the Malagasy banking market. 

The ariary was yet a lot weaker compared to the US dollar, during the political crisis in Madagascar. In May 2009, a dollar’s cost was Ar 2049. The national currency recovered in June to stabilize at around Ar 1930 for one dollar during the 3rd quarter, but plummeted against the euro. During this period, consumer prices were Ar 2 720 for the liter of Premium, and Ar 2680 for the liter of common gas. Between July and September, oil companies operated promotions, which allowed a temporary prices drop. 

The other parameter of the issue, the international crude oil course, appeared clearer. The rise was regular in margin of geopolitical troubles within producing countries and the global financial crisis. In March 2009, the barrel’s price was 50 US dollars whereas the red limit of 80 dollars has been overtaken in November. The intermediate rises, 65 dollars in July, 72 dollars in September confirmed the trend. In any case, the balance of 20 dollars made an irretrievable impact on consumer prices. 

It would, therefore, nearly be a miracle that the rise does not reach beyond 250 ariary per liter. Not exactly though, since oil distributors do not necessarily follow the price lowering trend on the international market, officially in expectation of fluctuations. On the other hand rises are reflected very quickly. This year, the political and economic crisis on the national playground generated a new born factor in the determination of fuel prices: the decrease of consumption. When price increases will hit diesel and paraffin oil, inflation smelling backlashes will reach households.