Prime Minister James Marape has assured Papua New Guineans that the government is putting in place emergency standby fuel arrangements and relief measures to shield the country from soaring global oil prices triggered by escalating conflict in the Middle East.
In a statement released yesterday, PM Marape said the government was not taking any chances with fuel security, especially given threats to key shipping routes such as the Strait of Hormuz.
“We are putting in place standby facilities to guarantee fuel security for our nation going forward,” the Prime Minister said.
“In light of what is happening globally, especially in the Middle East, we are not taking any chances.”
He confirmed that economic and energy officials have been instructed to prepare relief measures, including possible targeted subsidies, to prevent international price spikes from hitting households and businesses too hard.
“Our goal is to ensure that the impact of global fuel price increases is not heavily felt here at home,” PM Marape said.
“We want to maintain fuel prices below the rate of inflation and ensure they remain at a realistic and affordable level for our people.”
The Prime Minister singled out State-owned Ok Tedi Mining Limited and its energy arm for early action, thanking the company for securing additional aviation fuel shipments and maintaining diesel stocks.
“Ok Tedi has moved early to secure additional aviation fuel shipments and, together with existing stocks and fuel already in transit, is helping to ensure continuity of Jet A1 supply for the aviation sector,” he said.
He also revealed ongoing talks with major importers Puma Energy and ExxonMobil to keep fuel flowing and examine cost-containment options.
The statement comes as global oil prices have surged dramatically. Before the latest Middle East flare-up, crude was trading around USD 64 per barrel. It rose to USD 100, then leapt above USD 150 this week, with some market forecasts now pointing towards USD 200.
Economist Paul Barker, responding directly to the Prime Minister’s statement, welcomed the government’s focus but warned that PNG faces serious longer-term challenges if the middle-east crisis drags on.
“It’s important that the PM, Treasurer and team give major focus and preparation on this, to ensure steady supply of needed fuel and to help restrain undue price impacts on consumers, especially lower income earners,” Mr Barker said.
He stressed the need to keep the public calm and avoid panic buying or hoarding, which could worsen shortages.
Barker noted that Ok Tedi has been keeping aviation fuel flowing for months during PNG’s foreign-exchange crunch and earlier disputes with Puma Energy. However, he raised concerns that the mining giant is being asked to step well outside its core expertise.
“There is invariably concern that this mining company may be being asked to diversify its activities well outside its core areas of expertise and focus, at some potential cost to its own functions and perhaps standards,” he said.
On the global picture, he explained that roughly 20 percent of the world’s oil normally passes through the Strait of Hormuz, which is now effectively closed to most shipping except Chinese vessels and some escorted Indian ships. This has thrown supply chains into chaos, with tankers stranded far from usual refineries.
“Prices have risen from about USD64/barrel before the attack was launched, up to USD100, before slightly dropping back… but that was soon shelved with Iran’s threat to close the straits,” Barker said.
“Oil prices this week have leapt above USD150/barrel with supplies offered well above that and forecasts rising over days to USD 200.”
While prices can fall quickly, as they did after the 2022 Ukraine invasion spike, Barker said this conflict shows “no clear path of resolution” and Iran could sustain the threat for a long time.
“PNG can help mitigate costs in the shorter run, but if high prices are sustained, which seems likely unless there’s some constructive breakthrough, it would be challenged to sustain strong counter-market pressure,” he said.
He added that the only silver lining for PNG would be higher revenues from the country’s own gas and oil projects, which could deliver a windfall to the State through taxes and equity stakes.
Meanwhile, the Independent Consumer and Competition Commission confirms that the Middle East crisis has disrupted domestic price hikes. While petrol cost is up by K0.13 per litre and diesel by K0.22 per litre for the month of March, these increases are based on the benchmark prices from February.
ICCC says domestic prices for the next month (April) will see the impact of the current Middle East crisis, and further updates will be released next month given the one-month lag in price calculations.
