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
CONTACT US Caribbean Energy Information System Scientific Research Council Hope Gardens, Kingston 6, Jamaica
1-876-927-1779 (Telephone) 1-876-977-1840 (Fax) ceis@src-jamaica.org www.ceis-caribenergy.org
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.
page 2
Call: 1-876-927-1779 | Caribbean Petroleum Update : June 2011 Tax (10%) which increases as Gulf reference prices increases thereby leading to a larger absolute increase in domestic retail and wholesale prices for refined products. Additionally, refinery overheads are factored into the retail prices then the relevant taxes are applied to derive an ex-refinery price.
SYNOPSES OF THE PETROLEUM PRICING SYSTEMS USED IN THE CARIBBEAN continued from page 1/
of petroleum products. The same basic structure is used in all of the OECS countries and Trinidad & Tobago for calculating the retail prices of products such as Gasoline, Kerosene and Diesel. The reference price of petroleum imports used in these countries is based on the Mean Caribbean Postings system (quotations by oil companies). This system was established in the 1950s. However, this system does not reflect competitive international spot market prices. A simplified version of the retail petroleum price calculation/structure used in these countries is as follows: Calculation base: FOB Value of Imports + Freight & Insurance = C.I.F Value of Imports + General Consumption Tax + Customs Service Charge + Petrol Levy
] ] ]= ] ]
Landed Cost + Wholesale Margin + Retail Margin
] ] ]=Retail Price ] ]
In Jamaica, instead of the Mean Caribbean Postings, the US Gulf Reference Pricing System is used as the base for calculating domestic retail prices. This price forms part of a complex automatic formula used by the Petrojam refinery which allows for full pass through of any increases in the Gulf Reference prices to the retail prices. However, the adjustment process allows for one month smoothing policy which means there is no one to one increase in prices within the month.
Jamaica operates in a deregulated market environment which means that final retail prices are determined by the marketing companies who uses the ex-refinery prices provided by Petrojam as their base. In Guyana a similar deregulated environment exist whereby marketing companies determine the final retail prices. However, through the state owned Oil Company Guyoil, government tries to cushion the impact of international oil prices increases on the consumers by using the prices set by Guyoil as the benchmark for the other marketing companies - Guyoil prices are usually lower. Guyoil uses both the US Gulf Reference Prices and the Mean Caribbean Postings as benchmarks for setting prices. Countries such as Suriname and Belize have regulated environments hence government fix taxes and determine when prices are changed. In Belize a “next in first out approach” is used to establish new prices. This simply means that with each shipment of fuel the prices are recalculated (by Esso, the major importer of fuel) and passed on to the government who then determines or indicates when the change in prices becomes effective. Although the pricing mechanism/structures used in the Caribbean countries have slight variances, retail prices in all countries are impacted by changes in world international crude oil prices. These changes, in some way or the other impacts the revenue base for government, distributors/suppliers and most importantly the spending power of the small consumer. Outlined below are indications of the taxes and the margins as percentages of retail pump prices for Regular Unleaded Gasoline and Diesel in selected Caribbean countries
Taxes % of Retail Price
In comparison to the pricing structure used in the OECS countries, the Jamaican pricing structure includes an Ad Valorem
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COUNTRY BAHAMAS BARBADOS BELIZE DOMINICA GRENADA GUYANA JAMAICA (E-10) MONTSERRAT ST.LUCIA ST.VINCENT SURINAME TRINIDAD/TOBAGO
Diesel 25 19 25 17 23 12 22 12 23 11 32 30
Regular Unleaded Gasoline 23 25 28 21 24 15 22 13 23 17 32 55
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Diesel 15.4 10.9 12.3 6.1 11.7 8.5 12.6 11.9 10.4 10.4 7.3 13.0
Regular Unleaded Gasoline 13.7 12.6 9.8 6.6 13.4 6.3 12.5 11.4 12.1 10.3 7.4 8.5
Note: Jamaica - Margins are inclusive of haulage/transport cost.
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Margins % of Retail Price
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Caribbean Petroleum Update : June 2011 | Call: 1-876-927-1779
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REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP January - June 2011 In June 2011, upward movements in the retail prices for regular unleaded gasoline was seen in eight of the sixteen countries reviewed while prices remained relatively stable in five countries with the other three showing declines. These fluctuations in prices are constantly impacted by the changes in international crude oil prices and the pricing mechanics used in each country. Table 1: Unleaded Gasoline: Regular : Average Retail Price January - June (US$/Litre)
2011 COUNTRIES
JAN
FEB
MAR
APR
MAY
JUN
AVG
ANTIGUA/ BARBUDA
1.00
1.00
1.07
1.15
1.25
1.33
1.13
BAHAMAS [91 OCT]
1.24
1.25
1.30
1.46
1.47
1.47
1.37
BARBADOS
1.47
1.48
1.49
1.59
1.59
1.59
1.54
BELIZE [87 OCT]
1.33
1.34
1.48
1.50
1.54
1.51
1.45
B.V.I [87 OCT]
1.12
1.13
1.20
1.26
1.26
1.27
1.21
DOMINICA
1.01
1.05
1.06
1.11
1.21
1.24
1.11
GRENADA (95 OCT)
1.05
1.06
1.17
1.23
1.29
1.32
1.19
GUYANA
0.99
0.99
1.06
1.08
1.08
1.12
1.05
JAMAICA - E10
1.17
1.18
1.25
1.28
1.29
1.29
1.24
MONTSERRAT
1.13
1.14
1.18
1.27
1.38
1.42
1.25
ST. KITTS/ NEVIS
1.04
1.07
1.20
1.13
1.14
1.19
1.13
ST. LUCIA
1.14
1.14
1.16
1.22
1.27
1.28
1.20
ST. VINCENT/ GRENADINES
0.99
0.98
1.00
1.06
1.10
1.10
1.04
SURINAME [95 OCT]
1.21
1.32
1.34
1.47
1.55
1.51
1.40
TRINIDAD/ TOBAGO [92 OCT]
0.42
0.42
0.42
0.42
0.42
0.42
0.42
TURKS/ CAICOS
1.36
1.36
1.42
1.42
1.45
1.55
1.45
. NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.
CHART 1
See prices for other products at www.ceis www.ceis--caribenergy.org . C
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Call: 1-876-927-1779 | Caribbean Petroleum Update : June 2011
Average Weekly & Monthly Crude Oil Prices (Apr - Jun 2011) 125
US$/BBL US$/BBL
120 115 110 105
2011-Apr 2011-May
100
International Crude Oil prices have been on the decreasing trend over the past three months (April – June 2011). However, Caribbean countries continue to
2011-Jun
95
WK1
WK2
WK3
WK4
Mth Avg
Weeks
grapple with finding the foreign exchange to purchase the scare resources. Prices seen in June 2011 are still above the US$100/bbl mark. The highest average weekly price seen in June for the product was approximately US$113.5/bbl - seen in the third week of the
US$/BBL
month. This represented a 5.2% reduction when compared to the same period in April 2011 and a 4.8% increase when compared to the same period in May 2011.ď‚Ą
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