Private sector main beneficiary of oil price drop: Polye

By MATTHEW VARI

Wednesday, January 14, 2015 (Midweek Chronicle, PNG)

THE private sector is set to be the winner in light of the current downturn in oil prices, says former Treasurer and now Opposition Leader Don Polye.

He said despite the fact that the situation would affect the extractive industry and as a consequence the income of the State- the onus was now on the Government to ensure that the private sector flourishes as a means to balance the loss that is expected due to this.

“Because of the shock in the unexpected drop in fuel prices you will see a reduced income into the State Coffers for the government to meet the requirements of the budget,” Mr Polye said.

“On the other side there will be deflation because of the downturn in prices. The consumers of diesel and other fossil fuel products will be happy.”

“What is going happen is that the Private sector in PNG will grow with people spending less for fuel along will retailers and transportation companies and agriculture producers and manufacturers will benefit also saving money there and should balance out this downturn in government revenue.”

He however added that it was now incumbent on government refloat the kina, and not allow the packing of the kina to continue, to enable exports are cheaper.

“Those producing will sell more at a lower cost of production selling our products cheaper to make more money, which is good for the government to get more taxes to support themselves to make up for some of the downturn experienced in the extractive industry.”

He said despite not being someone closely working with oil- the dynamics of the global market of oil was such that the drop could remain for some time.

“The domination of the Middle-East has been threatened now that its biggest buyer, the US, is now producing more oil domestically,” he said.

“The US over the last 10 years has produced oil which is substituting the imports of oil from the Middle-East, which will lose money.”

“Before that happens the OPEC countries have increased supply and reduced prices to protect their consumer base.”

He said that the dynamics of such was what he sees and is what the opposition is telling the people that it will take a while yet.

“Not six months to come down, as the supply is there, and with no major wars being fought in the world the consumption of that oil supply will be steady.”