Saturday, 31 October 2020

[OP-ED] Why so Quiet?

COSTA RICA OP-ED — While indeed volatile, the price of oil has plummeted about 23% since June of this year. But not a peep from RECOPE, ICE or the Administration.

According to La Republica, Costa Rica will save us$117 million dollars as result of the fall in crude prices over the last four months. A pretty good savings, right? And this goes straight to the bottom line.

The losers in all this are the exporters of oil and the winners are the importers; that’s us. So why then is there such a hush about our windfall profit?

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Better yet, why has the Administration and pricing czar of Paradise ARESEP not dramatically lowered the cost of both gasoline as well as electricity? I am almost certain that if the reverse were true, RECOPE and ICE would beg immediately for another upward price adjustment.

Since shipping costs, and in specific gasoline, have always been used as an excuse to raise the prices of imported goods, the downward trend in the cost-of-doing-business should proportionately be the easing of product prices. But then again, at Christmas in Costa Rica it is “ca-ching” and time to make big profits. This year, much better than last unless the money strapped consumers just cannot buy and buy some more.

Most economists, including the World Bank agree that the price of crude will remain between $80 and $90 for the next year or so. Two things to keep in mind:

1) 100% of all commodities can be considered hi-risk
2) Economist are seldom correct in the long term.

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However, in this case, we have some pretty good reasoning to support their contention. One of the most prominent is a slow down in the global economy that cannot be denied. Especially in Europe and to a lesser degree in China. That is followed by the U.S. who, with the help of fracking has increased oil output by 40% since 2009 to a robust 7.4 million barrels per day. In fact, there is some suspicion that the U.S. is controlling the price of oil to hit Russia along with Venezuela right were it hurts since both countries rely on crude as a major part of their national income. Russia will suffer, but can withstand the loss of income. However, Venezuela might very well default on its foreign debt as it has already defaulted or significantly “delayed”, according to that country’s government USD payments to private enterprise such as airlines, foreign exporters and importers. Inflation is already the highest in the world and according to the IMF is 63% on an annualized basis.

On a micro-level, there is every reason for Costa Rica to lower the price at the pump and our cost of energy in both the work place as well as homes. There is just no excuse!

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Juan Sebastian Campos
An expat from the U.S., educator and writer in English and Spanish since 1978 with a doctorate in business administrations (DBA) from the United States and Germany. A feature writer for ABC News, Copley Press and the Tribune Group with emphasis on Central America.

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