Megh Pillay, former director of the State Trading Corporation: “Fuel prices can be adjusted at any time”

Just recently, some analysts feared that the price of a barrel of Brent oil could reach 200 dollars. However, it was at $107 on Thursday April 14 and had even fallen back below $100 at the start of the week. What is your analysis of this development?
It is a downtrend that is emerging. Actually, it is a normal phenomenon. The price of oil internationally has reached a point where it is self-correcting. A drop in demand causes this rebalancing. Part of the consumption, and therefore of the demand, disappeared due to the high level of the price, which had peaked recently. The experience we have had in the past translates as follows: arrived at a threshold where, on the one hand, consumption shrinks and, on the other, marginal production is revived, the price of oil will stabilize around a new median, slightly below the average price before. It is the fundamentals of supply and demand that will be decisive. External phenomena like war between two countries can have a temporary influence.

The Organization of the Petroleum Exporting Countries (OPEC) has lowered its global oil demand forecast for 2022. Is this a factor that could influence the price?
This will definitely influence the price. The projections are based on demand forecasts, which depend on industrial activity using oil. Forecasters use different indicators to make estimates, but it is difficult to predict the evolution with certainty. There have been so many changes. The situation is dynamic and there is nothing more volatile than the price of oil.

Let’s talk about the local situation. Is it the Ministry of Commerce that is responsible for preventing the State Trading Corporation (STC) from increasing fuel prices in Mauritius again?
The STC is a “collecting agent” for the government and the Mauritius Revenue Authority. It is the State that decides on the taxation of petroleum products sold in the country. We will simply play on the amount of taxes imposed on fuels which, it should be remembered, are very heavily taxed. In the event that the decision is made to maintain or lower fuel prices in Mauritius, simply turn the button. The STC has good leeway and is credible with the banks as a public body. According to the law, the Minister of Commerce has decision-making power over the STC. It is he who approves its budget and the appointment of its CEO.

To what extent is an amount of Rs 4 billion, advanced these days, could help absorb any increase in fuel prices on the local market?
The rumor about the amount of Rs 4 billion is a masquerade. Fuel prices can be adjusted at any time and be decreed by the Minister of Trade. It’s not magic. There is a “cover approval” for the amount of overdrawn credit that can be used. The “pricing mechanism” also provides for a “price stabilization fund” fed by revenue surpluses. The formula exists. You just have to trigger the mechanism.


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