Caribbean Energy Information System (CEIS) June 2011
When increases in international crude oil prices occur, the important question that comes to mind is how these increases will be “passed through.” From a consumer perspective the consumer becomes concerned with the impact of such increases on retail prices of refined fuels such as gasoline, diesel, kerosene and LPG. From a Government perspective particularly in countries where government regulates the petroleum sector, explicit/timely decisions have to be taken as it relates to the degree of passed through of world oil prices to the domestic prices. Similarly in countries where retail prices are market driven, pressures are placed on governments to adjust policies or taxes to cushion the effects of higher world prices on the consumer. In such instances, effects on government revenues, income of other players such as distributors, impact on consumers, effects on income distribution and inflation and their effects on resource allocation are brought to beer. A lack of pass through reduces incentives to economize on fuel use and increases fiscal risks through unachieved subsidies or revenues. The pass through rate of world oil prices is based on a Country’s retail pricing regime.
The International Crude Oil Pricing Method has been Changing together with the development of Oil Market Structure.
Pricing Regimes Most Caribbean countries utilize a market pass through pricing regime whereby countries adjust retail prices with every shipment continued on page 2/
Source: http://www.usea.org
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CARIBBEAN PETROLEUM UPDATE is a monthly Bulletin which highlights petroleum issues affecting or relevant to the Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.