A drop in the International Price of crude does not automatically translate to a drop in the Price - Well atleast for the Gambia

Petroleum pricing albeit complex can be explained by the price at the pump. In a dynamic pricing model, an upward or downward swing in price of crude filters down at the pump. Crude oil is generally used as a benchmark for pump prices and the Gambia is concerned with the price of refined petroleum products such as Jet fuel, Diesel oil and Morgas. Globally, the price of crude oil has dropped in excess of 40% from June 2014 to date ($112 to $70 per barrel).  The drop in crude price positively impacts the price of refined products per metric ton.  Petroleum products are drivers of economic growth and the cost of electricity, taxi fares, a bag of rice and cement are all indexed to the cost of petroleum. Therefore, all things being equal, a drop in the price of petroleum at the pump will be a relief to consumers since most if not all economic activities are sensitive to energy prices. The average consumer wants to benefit from the drop in price but not so quick and it is highly unlikely that the drop will translate to a reduction at the pump in the case of the Gambia. This in simple terms defies logic, but there are other factors preventing the pass on savings to the consumers.

The sharp drop in the price of petroleum products internationally may not filter down in the case of the Gambia for the simple fact that the exogenous factor (savings made on the cost of procuring fuel internationally) is eroded by an indigenous factor (difference in exchange Dalasi/Dollar exchange rate). Our petroleum importation is settled in dollars therefore the current exchange rate absorbs all the savings accrued in the procurement of fuel. Currently, there is an inverse relationship between the price of fuel and the cost of the dollar against the dalasi. Our current pump price is in line with the current price of the dollar locally and the ONLY way we can benefit from the slumping oil price is when our dalasis/dollar rate changes with few dalasis needed to exchange a dollar. 

In a static environment where the impact of indigenous variables are negligible to price differentials, the current state of global oil prices COULD HAVE BEEN a blessing for the Gambia. This could have been a much needed economic stimulus that will jump start and smoothen the cyclical dents we are currently encountering due to Ebola and a poor rainy season. 40% reduction on oil prices locally, would have been a boost for consumer spending by creating excess disposable income which would have spurred growth but this is wishful thinking because our current fundamentals especially on the forex front would not be in a position to accommodate such an eventuality. Therefore until such time that our fundamentals can take advantage of global pricing, we will live with our current dispensation.