UN agency says developing economies pay most for fuel
The UN trade and development agency said developing economies are paying the heaviest price at the pump after oil prices soared when war shut the Strait of Hormuz in February, according to UN News. The pain has been far from equal, according to a new report from UNCTAD.
Diesel prices in Nigeria jumped by about 83% between late February and the end of August, compared with nine percent in Ireland, the report found. Gasoline rose by about 51% in Myanmar, but three percent in Sweden. Taxes, subsidies, domestic pricing rules and exchange rates all shape what people end up paying, UN News reported.
The price of Brent crude, the most widely used global benchmark, rose from around $70 a barrel in January to over $120 in March. UN News said the rise came as the closure of a route that normally carries a fifth of the world’s oil sent markets into a spin. Prices eased between April and June as diplomatic talks progressed, then climbed again when negotiations collapsed and fighting resumed.
Futures markets suggest oil will stay expensive until the end of the year, keeping fuel and transport bills high for businesses and households, UN News reported. Higher fuel prices raise the cost of living even for people who never buy fuel directly. Higher diesel prices make it more costly to transport goods, which raises the price of those goods.
Earlier research on developing economies found that a 25 cent rise in fuel prices per litre could reduce household purchasing power by more than five percent on average, UN News reported.
Economies that depend heavily on imported fuel are particularly affected, UNCTAD said, because they must spend more to meet their energy needs. In 2023, net fuel imports — spending on fuel imports minus earnings from fuel exports — amounted to a quarter of Cabo Verde’s gross domestic product and nearly a fifth of Lebanon’s. A higher fuel bill leaves less money for other imports such as food, medicines and equipment, UNCTAD said. Governments already facing budget pressures have less room to protect households from rising costs.
The UNCTAD report called for more varied energy supplies and investment in affordable renewable sources to reduce exposure to future shocks. It said sources such as wind and solar rays are not vulnerable to geopolitical shocks and cannot be depleted. UNCTAD also noted that in over 90% of cases, renewables are less expensive than the cheapest new fossil fuel alternatives.