The 04 Great Reasons That Explain The Soaring Prices Fuel

David Kipre

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2022, March-July period, inflation has new targets. This time, it is fuel that is experiencing an increase in its purchase price, under the eyes and astonished pockets of consumers. The increase in food prices was already hurting the population who complained about an excessive increase in the price of living; this increase in the price of hydrocarbons is another blow that is inflicted. But why is it so expensive?

It should be noted that the price of gasoline has risen from 600 to 700 cents in Togo during this period. In other countries too, the same phenomenon is taking place, as in France where the price of diesel has increased by 14 cents and gasoline by 7 cents compared to 2021.

This price increase is due to the war in Ukraine, but not only…

1-The impact of COVID-19

The economic recovery after COVID, is one of the reasons for the increase in the price of the barrel.

In fact, the prices of fuels are made in relation to the barrel of Brent “world reference of oil prices”. According to the supply and demand, the quotation is made. And given the resumption of economic activities after a long sleep, the demand is only increasing, and therefore the prices too.

More demand means higher prices, which is logical,” insists the president of the French Union of Petroleum Industries. ( Ufip )

2-The euro/dollar exchange rate

The price of barrels is, as we all know, indexed in dollars. Given the conversion rate which, in most countries, favors the dollar, it is quite normal for prices to be overvalued. If the dollar is stronger, the price is higher in countries that do not use it, and if the local currency of a country is stronger, depending on the variation of the exchange rate, the price of the barrel will of course be lower.

3-The price of fuel

Before being distributed at the pump to individuals, fuel is purchased from suppliers, not on the basis of a fixed price, but in relation to the Brent barrel, which can fluctuate and which is basically “established by continent”. In Europe, for example, prices are aligned with the Rotterdam quotation, and it should be noted that with the conflicts in Ukraine, countries are afraid of a lifting of the embargo, which is why the price of diesel has risen.

In Africa, the various sources of supply are also plagued by the same problem, especially since the distribution stations do not have reserves that would allow them to sell the stock at a lower price than the current price of fuel.

4-The war in Ukraine

Indeed, the current focus of attention of the world, which fears the explosion of a 3ème world war, the conflicts in Ukraine do not cease to feed the fear of its European neighbors whose survival depends in part on this conflict. The transportation of foodstuffs and hydrocarbons is slowing down, since the two countries in conflict are centers of production and supply of the majority of the world’s resources.

It remains to be seen whether the price of fuel will fall, and so far the experts are not saying anything. As long as the conflict situation has not calmed down, it is almost impossible to give a prognosis. The population, meanwhile, is not at all satisfied with this situation, which they characterize as abusive and tiring, especially since inflation really affects the most important sectors.

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