Below is a statement issued by the Office of the Prime Minister, giving an analysis of the Modified Pass Through Mechanism and the impact on the prices of petroleum products for the adjustment period October 2013 to January 2014.
On Monday, October 28, 2013, the Office of the Prime Minister issued a press release announcing the new fuel prices for the period October 28, 2013 to January 20, 2014.
Since then, there has been suggestions in some quarters, some of it misguided, that the Government of Saint Lucia has decided to increase fuel prices at a time it is decreasing worldwide, as a means of collecting revenue at the expense of the poor people of Saint Lucia.
The following are the details to be analysed and considered as it relates to the recent changes in the price of petroleum products in Saint Lucia:
1. The changes reflect developments in international oil prices over the past three months — July 22 to October 11, 2013;
2. International crude oil prices, measured by the West Texas Intermediate (WTI) benchmark price averaged US$96.1 per barrel for the period January to September 30, 2013, compared to US$94.9 for the same period in 2012;
3. The recent upsurge in oil prices has been influenced by geopolitical tensions in the Middle East, heightened by the situation in Syria (chemical weapons attack on August 21, 2013);
4. Nonetheless, the US’ weak economic recovery and the partial government shutdown coupled with increased supply from Saudi Arabia and Non-OPEC oil producers placed downward pressure on prices in late September 2013;
5. During the period July 22 to October 11, 2013, WTI prices averaged US$106.24 per barrel as compared to the previous adjustment period which averaged US$97.34 per barrel;
6. These developments have contributed to an average increase of 6.7 percent to the CIF on imported petroleum products into St. Lucia. However, the increase to the consumer for gasoline and diesel was only 2.6 percent and 2.3 percent respectively;
7. The cost sharing mechanism implemented by the Government of Saint Lucia will lead to a further EC$ 4 million in revenue forgone. That, added to the revenue shortfall of over EC$3 million based on budget projects from April to October 2013, cannot be a happy situation for the Government;
8. The lower the cost of international oil prices, the lower the cost of bringing these products into Saint Lucia, and the better for the Government, as there would be no need for such a high subsidy on the 20 pound LPG, and further, there would be no need to further compromise the fiscal situation by reducing the excise tax on fuel;
9. For the period April 29 to July 28, 2013, international prices fell by an average of 3.2 percent to US$94.67. However, influenced by concerns about potential supply disruptions due to the political turmoil in Egypt, oil prices reached US$105.52 per barrel on July 10, 2013;
10. Despite this, there was a reduction in fuel prices on July 29, 2013. Unleaded gasoline reduced by ten cents per gallon. Diesel was reduced by fifty cents per gallon. Kerosene was also reduced by $1.92 and the twenty pound LPG was reduced by $1.25, notwithstanding a government subsidy of $17.95;
11. What this demonstrates, is that the price adjustments takes into account the movement over the three month period of purchasing and is not a reflection of what is happening on the international market on the day the adjustment is made in Saint Lucia;
12. Therefore, if the cost of importing fuel from July to October decreases, when the prices are adjusted in October there will be a decrease. By the end of October, there may be factors which would cause the price of crude oil to increase sharply, but that would be reflected in the following period, as no petroleum products would have been imported to Saint Lucia at the time of adjustment, at the increased cost.