Freight Charges for the Transport of Petroleum Products Will Edge Higher
It was announced by Egypt that it would be increasing the transit fee for containers carrying oil-laden tankers that go through one of the most essential waterways in the world, the Suez Canal.
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The Canal's jurisdiction stated that an additional 15 percent fee would be added to the oil and petroleum product carrying tankers and an additional 10 percent fee on cruise ships and dry bulk carriers.
Osama Rabie, the chief of the authority, stated that the raises that will be implemented on January 01, 2022 are necessary and inevitable. He further accused the skyrocketing inflation rates worldwide that led to the price increase of the Canal's functions, upkeep, and maritime services.
Suez Canal acts as a pathway for around 10 percent of the world's trade, including 7 percent of the global oil, which is a significant source of international currency for Egypt, the country with the most prominent Arab population comprising more than 103 million people.
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The country has faced extreme economic challenges and is facing a scarcity of international banknotes required to purchase necessities like fuel and grain.
According to authorities, 20,649 vessels went through the canal the previous year, which is more than 10 percent compared to 18,830 ships in the year 2020. In 2021, the yearly earnings of the canal attained USD 6.3 billion, a record high.
Since March 2021 incident in which a hulking vessel was going through the canal and got stuck closing it off, the canal authorities started working on measures to deepen and expand the southern part of the waterways. The blockage lasted for six days leading to the disrupment of international shipment. Also, on August 31, an oil tanker went underground and blocked the waterway for a while before being freed. Inflation may be fuelled by the rise in fees.
While the Suez Canal waterway price rise will not impact the trade flows heavily, it will add to the continued inflation. Tim Huxley, the chairman of Mandarin Shipping, stated that with the prices of oil presently declining, the rising canal prices would lose against the competition (which is going around Africa), leading to the Canal Authority's loss.
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The worldwide prices of oil have been rocky this year, from soaring to USD 130 per barrel after the Russia-Ukraine war to dipping to near USD 80-90 per barrel in the current weeks.Huxley stated that the fee rise would be handed to the consumers, resulting in high inflation.
In August, the U.S. noted an 8.3 percent yearly rise in consumer costs. The high shelter and food prices will start a gas price decline. As per Procurement Resource, the decision by Egypt to increase the prices for letting shipments of oil and petroleum go through the Suez Canal's waterways will lead to an addition to the already soaring inflation. However, this will not impact the trade flows, and the consumers will have to bear the brunt of the fee rise.