University of the South Pacific’s Senior Lecturer in Economics, Dr. Neelesh Gounder says Russian invasion of Ukraine presents risks of inflationary pressures and external sector risks to the Fijian economy.
Soon after Russian President Vladimir Putin authorized military operations in eastern Ukraine, the prices of crude oil rose to just over US$100 a barrel.
This is the highest since 2015 and represents an almost 40% rise since December 2021.
Gounder says the rise has been mainly due to the high possibility of supply disruptions in the short to medium term, putting pressure on oil prices to rise as distributors increase demand to scale up stock.
He says what happens in the crude oil market has implications for the world economy and as a result no economy is immune from this impact since all petroleum fuel is produced from crude oil.
For Fiji, any rise in global crude oil prices especially through rise in average prices of refined products in Singapore trading market poses inflationary risks through an increase in petrol and diesel prices.
This is followed by shipping costs and supply chain issues related to COVID-19 which also add to the pressure on prices. These also pose external sector risks to the Fijian economy such as those arising from our trading partners.
He further added that there is a possibility that member governments may tap into the U.S. Strategic Petroleum Reserve (SPR) to release supply disruption pressures in the short term.
However, it is not clear how long the global tensions arising from the Ukraine crisis are going to last.
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