The decrease in global fuel prices is pushing down the prices of goods and services in the local economy too. However, the decrease is not being felt, as much as, it is in the international market.
In the international market, oil prices fell by over 57 percent since June last year. It has dropped from US$ 115 a barrel to less than US$ 50 a barrel during the same period.
From June to November last year, inflation dropped to 6 percent from 8 percent.
The Director General of National Statistic s Bureau, Kinga Tshering, said the decrease in inflation rate was, to a huge extent, attributed to the decrease in global oil price.
When there is a decrease in the price of fuel in the global market, local oil price will also decrease since Bhutan imports all its fuel requirements from India, which in turn sources its requirements from abroad.
Kinga Tshering said fuel price was the fourth major contributing factor while calculating inflation.
It is also considered a major determining factor in global economy. He said when fuel prices decreases; prices of almost all the other commodities follow a similar trend.
“Transportation of goods and commodities becomes cheaper with decrease in fuel price. Besides, any economic activity, which uses fuel, as a major raw material is bound to become less expensive.”
Bhutan’s expenditure on fuel is also expected to decrease with decrease in fuel price.
Last year, between January to October, Bhutan imported fossil fuel worth Nu 5.6B.
In 2013, the country spent Rs. 7.8B for fossil fuel.
The drastic decline in global oil prices was driven mainly by increased production and lesser demand.
Oil production has increased in the United States allowing them to depend lesser on the oil producing countries.
On the other hand, Opec countries, an organisation of petroleum exporting countries, have continued with the same production scale thereby creating a situation of increased supply and lesser demand.
The slowdown in Chinese economy also reduced global demand for fuel.
However, whether this trend will continue or not is highly uncertain given the extreme volatility of fuel prices. The substantial decrease in fuel prices has affected other oil producing countries outside the Opec, who are considering increasing prices.
