Oil price surge hits developing countries hardest
By the AFREEQUE newsroom, based on Infomediaire
Illustrative image · Fahad Puthawala · Pexels · Licence PexelsThe oil price surge is hitting developing economies harder, with Brent rising from about $70 in January to more than $120 in March. Higher fuel prices are driving up transport, food and consumer goods costs, according to a UNCTAD report.
The surge in oil prices affects consumers in developing countries more than those in advanced economies, according to a report by the United Nations Conference on Trade and Development (UNCTAD). The price of a barrel of Brent crude rose from about $70 in January to more than $120 in March, after the closure of the Strait of Hormuz, through which nearly one-fifth of the world’s oil normally passes.
Prices fell between April and June before rising again after diplomatic negotiations failed and fighting resumed. Futures markets anticipate high prices until the end of the year, UNCTAD said.
Higher fuel prices increase the cost of transporting goods and supply costs, driving up food and consumer goods prices. Previous studies cited in the report estimate that a 25-cent increase per litre can reduce household purchasing power in developing economies by more than 5% on average.
Countries dependent on fuel imports are spending more foreign currency on their energy supplies. In 2023, these net imports accounted for 25% of Cape Verde’s gross domestic product and nearly 20% of Lebanon’s. UNCTAD recommends investing in solar and wind power, which are less costly than new fossil-fuel facilities in more than 90% of cases.
