The accelerated increase in oil prices, after the outbreak of the conflict in the Middle East, could lead to a 10-15% increase in fuel prices in the coming weeks, with second-round effects on inflation in Romania, said Adrian Codirlașu, president of CFA Romania, for Agerpres.
“If we look at the global level, we see that this conflict has led to an increase in risk aversion among participants in financial markets. How do we see this? By the fact that the stock markets fell both at the end of last week and today. We also see that the prices of precious metals have increased both today and at the end of last week,” Codirlașu mentioned.
According to him, the direct impact of the conflict could be even higher than 10%, with estimates indicating a cumulative effect of 15-20%, given that markets had already anticipated the escalation of tensions, and prices had previously started to rise.
“However, the most was seen in the price of oil. Today it increased by almost 10%, and this will have an effect on inflation because, with the increase in oil prices, the price of fuel also increases. We can see, over a two-three week horizon, this increase in oil prices transposed into the price of fuel. We estimate a possible increase of 10-15% in fuels, if current developments continue,” added the president of CFA Romania.
He stressed that the increase in fuel prices will generate second-round effects, through price increases in other sectors of the economy, especially in agriculture and transport, where fuel costs have an important share.
“This fuel price will also be passed on to other components of inflation, through the so-called second-round effects. In a month or two we will see slight increases in other sectors as well. For example, agriculture uses fuel substantially, as does transportation. So we can see a slight increase in prices also from these second-round effects,” the specialist explained.
As for Romania, the impact of the conflict will be felt mainly through the inflation channel, Adrian Codirlasu emphasized.
“The impact for Romania will be mainly through inflation, namely through the price of oil, because we do not have significant economic relations in that area. With Iran, for example, we have almost no economic relations. Thus, the only impact on Romania is through the price of oil. The disinflationary process will be slower, inflation will remain around 10% for a longer time. However, we maintain our projection that we had at CFA Romania, namely an inflation rate between 6% and 7% at the end of the year,” added the president of CFA Romania.
He drew attention to the fact that over half of the price of fuel is represented by taxes.
“If we think about the price of fuel, more than half of it represents taxes, and recently excise duties on fuel have also increased,” added Adrian Codirlașu.