The Ministry of Finance announced the increase Tuesday after Prime Minister Baldwin Spencer hinted on Sunday that an increase was coming due to the rising price of oil globally.
The hikes of $1.89 for gasoline and $2.24 for diesel come as a partial implementation of the market pass-through mechanism for fuel prices, which was last activated in September 2010.
International oil prices have shot up well over US $100 a barrel in recent weeks due to unrest in the Middle East, although they did slump to under US $98 a barrel yesterday in response to market fears over the Japanese crisis.
Local economist Ted Lewis, who lectures at the Antigua State College, has warned continued high oil prices could jeopardise economic recovery in the country.
“It means that we are still not yet out of the gloomy situation. It means that there is still a lot more work to be done and it seems that this could lead – rather than us recovering – it could actually lead to the worsening of our economic situation,” Lewis said.
He said while tomorrow’s fuel increase will have a severe impact on the population he is also worried about the impact of any future increases in the global price that would have to be passed on to local consumers.
“The anticipated future increase in oil prices could affect the pace at which we recover from our economic crisis. It could affect consumption, investment or it could affect aggregate demand which would lead to recession,” Lewis said.
“Any more increase in fuel prices will lead to increases in international food prices, which will cause a higher level of inflation in importing countries like Antigua & Barbuda … It’s really bad for business.”
The International Energy Agency (IEA), which implements an international programme of energy cooperation among 28 member countries, warned continued high oil prices, coupled with potential fiscal tightening measures and inflationary pressures, could derail the fragile global economic recovery.
“If it continues to be $100 through the year, it will certainly be detrimental for the economic recovery all over the world,” IEA chief Nobuo Tanaka said. “If prices move higher, it will certainly create more problems.”
Meantime, The West Indies Oil Company (WIOC) said it has had no supply issues following the unrest in the Middle East, since the company sources most of its oil from Trinidad & Tobago and Venezuela.
The company said it is subject to the international price of oil and has been affected by the high prices in the past few weeks.
(More in today’s Daily OBSERVER)