Some weeks ago members of the public raised concerns over the falling world fuel prices which they claimed were not being reflected in the then current prices paid at the pump. The opposition talking heads with their characteristic reckless abandon jumped on the bandwagon accusing government of profiteering and deliberately keeping local retail prices high. It should be pointed out that the excise tax on fuel is a fixed dollar figure approved by parliament and not a percentage. There is no revenue benefit therefore which accrue to government as a result of high prices. In fact, because consumers use less fuel when prices are high government is more likely to lose revenue due to lower consumption when prices are high.
Although fuel prices on the world market have recently been declining, it is important that the public notes that whilst world fuel prices were soaring in June and July, 2008 the local oil marketing companies had been selling at the then existing wholesale prices of $15.16; $15.49 and $14.56 and retail prices of $15.69; $15.97 and $14.87 per gallon for gasoline, diesel and kerosene, respectively, as fixed with effect from June 20, 2008.
No doubt, the local companies experienced reductions in their margins on every follow-up shipment, as the required price adjustment in July and August did not take place. As a result, the Ministry of Trade, Industry and Diaspora Affairs received verbal communication from all three companies during that period regarding their concern at the failure by Government to further adjust domestic prices upwards in line with upward movements in world market prices.
It must be emphasized that while the price for crude oil changes daily on the international market, prices for petroleum products are adjusted every four weeks locally. The daily postings on the world market are recorded to calculate the local weekly average and four weekly averages are used to determine the average posting for determining the local wholesale and retail prices. This mechanism, developed with the assistance of the World Bank, has been in place since October 1st 2003 and has worked well since prices fluctuated up and down on the world market. When prices began to climb internationally with no compensatory decrease, the four week average price was always below the last posted world market price and local importers complained that they were making a loss on sale of petroleum products as a result of this. Now that prices are tumbling, the drop in the average price lags behind the last posted world market price and consumers complain, forgetting that the price actually paid by importers for the last shipment of fuel received on island may well be higher than the most recent daily posting on the world market.
Towards mid July world fuel prices were declining, but the decline started from a price level much higher than the four week average of 3.389 US$/gal for gasoline that was used on June 5, 2008, to calculate the then fixed prices as indicated above, which had come into effect from June 20, 2008. Had fuel prices been adjusted four weeks later i.e. on July 11, 2008 based on the average posted price from June 6, 2008 to July 3, 2008, i.e. 3.479 US$/gal, the new retail price from July 11, 2008 would have been $16.34, $17.17 and $16.03 per gallon for gasoline, diesel and Kerosene respectively.
A further adjustment four weeks later, i.e. as of August 7, 2008 based on the average posted price of 3.420 US$/gal for gasoline for the period July 4, 2008 to July 31, 2008 would have been $15.77, $16.81 and $15.69 for gasoline, diesel and kerosene respectively. World market prices fell only marginally from a high 3.527 US$ per gallon for the week of July 3, 2008 to US$3.494 per gallon for the week of July 10, 2008, to US$3.470 per gallon for the week of July 17, 2008 and US$3.435 per gallon for the week of July 24, 2008. The first significant drop came only in the week of July 31, 2008 when the average daily posting for world market prices dropped to US$3.251 per gallon.
In August the prices have continued to fall further. This decline, using the four week average of the posted market price from July 24, 2008 to August 14, 2008 of 3.239 US$/gal resulted in the drop of retail prices on Thursday August 21, 2008 to $15.20, $15.68 and $14.51 per gallon for gasoline, diesel and kerosene, respectively.
This adjustment in prices was done to bring some intermediate relief to consumers as the 4 weekly period that would normally have been used was the period of July 31 to August 21, 2008 and would only have taken effect on August 28th 2008.
World market prices continued to fall throughout August and new reduced retail prices of $14.68, $14.58 and $13.47 per gallon, for gasoline, diesel and kerosene, respectively, reflecting the actual price charged for the last shipment of fuel imported into Dominica, was announced with effect from August 27th 2008.
HONOURABLE CHARLES A. SAVARIN
MINISTER FOR PUBLIC UTILITIES, ENERGY AND PORTS
September 4th 2008