Money – Banking · Editorial
By Moakanyi Magazine · Global Issue · June 2026
Botswana produces no oil, yet every litre it burns ties the national budget to events far outside its control. The sharp moves in oil prices during recent Middle East supply disruptions are a plain illustration of that exposure – and a prompt to treat price volatility as a planning problem rather than a passing headline.
When crude moves abruptly, the cost of importing fuel into a landlocked economy moves with it, and so do transport, logistics and the price of nearly everything that travels by road. The shock starts at a distant wellhead and finishes at a Gaborone forecourt and on a Francistown freight invoice.
The cost of a price that will not sit still:
Volatility, not the level itself, is what wrecks a budget. A government and a business can plan around expensive fuel if they know it will stay expensive. What they cannot easily absorb is a price that lurches, because every lurch forces a fresh round of guesswork on subsidies, transport contracts and household costs. For Botswana, where fuel is imported and freight distances are long, that uncertainty compounds.
The disruption also showed how quickly the picture can turn: physical crude markets moved from tightness to discounts as Middle East supply ramped up. For a planner, a price that can swing in either direction on short notice is harder to manage than one that is simply high, because it defeats the assumptions a budget is built on.
The reach of that uncertainty is wide. Fuel sits inside the cost of almost everything that moves in Botswana, so a swing at the pump feeds through to freight rates, retail prices and the price of inputs for businesses far from the energy sector. A single volatile line item ripples across the whole economy, which is what makes managing it a national rather than a sectoral concern.
It is the swing, not the level, that breaks a budget.
What hedging is, and is not:
Hedging is the deliberate purchase of price certainty – locking a cost in advance so a known figure can be planned against, accepting that the locked price may end up above or below the eventual market. It is insurance, not a wager on direction. For an importing economy, the case for it strengthens precisely when prices are volatile, which is also when it is hardest to arrange on good terms.
The distinction matters because hedging is easily caricatured as speculation. A speculator takes on risk in pursuit of gain; a hedger gives up the chance of a windfall to be rid of the risk of a shock. For a country that values stability over surprise, that is the prudent trade, even when prices later move the hedger's way.
Hedging buys certainty, not a bet on where prices go next.
A discipline for institutions, not just traders:
The relevant actors here are public and corporate planners – the institutions that carry national fuel exposure. Building the capability to hedge, and the governance to do it prudently, is a slow institutional task. The Middle East disruption is a reminder that the time to build that capacity is before the next shock, not during it.
Governance is the harder half. A hedging programme run without clear mandates and oversight can drift from insurance toward risk-taking, which is why the rules around it matter as much as the instruments themselves. The aim is a disciplined process, agreed in calm conditions, that holds steady when prices do not.
Not every exposure needs to be hedged, and judging how much certainty to buy is part of the skill. Hedging carries a cost, and locking in too much can be as unwise as locking in too little. The mature version of this discipline is not a reflex to hedge everything but a considered view of how much volatility the budget can comfortably carry and how much is worth paying to remove.
Hedging capacity is built between shocks, not in the middle of one.
For Botswana, the lesson of the latest oil swings is modest and durable. The country cannot influence the price of crude, but it can decide how much of that uncertainty it is willing to carry. Treating oil-price volatility as a standing budgeting discipline – rather than a recurring surprise – is the difference between absorbing a shock and being knocked off course by it.
Sources: Reuters
