Caribbean: GAS MAY RISE - Gov’t to Implement a flexible pricing structure for fuel    

antiguasun.caribbeanads.com 03/05/2003

Antiguans & Barbudans may soon be paying more at the pumps for gasoline. This was disclosed in a press release issued by the Prime Ministers office stating that the government had been forced to review the controlled Pricing Structure for fuel.

The release states that the government has set a fixed pump price of $6.85 up to the point where the market price reaches $2.60. Increases above this point would be passed on to the pump.

This means that the price at the pump would adjust upwards from $6.85 in line with market prices as translated through the price build up.

The old controlled Pricing Structure will be replaced with a new Flexible Pricing Policy that will reduce the Government’s input in the price of the gasoline allowing for the market force to determine the price at the pumps.

This move by the government, according to a source from the private sector, will adversely affect the cost of transportation. This may cause bus and taxi fares to be increased. Additionally, the source suggested that the government’s timing in making this announcement might be linked to the fact that oil prices will remain high due to the pending US/Iraq war.

However, the government views the move from a Controlled Pricing Structure to a Flexible Pricing Policy as significant to meeting its obligations and maintaining a stable economy.

The release further stated that a review of current fuel prices within the OECS shows that Antigua & Barbuda’s pricing for gasoline in particular ($6.8506) is below all other islands except St. Kitts/Nevis. These countries are also reviewing their fixed pricing policy in view of the current market prices.

The threat of war in Iraq and the current unstable conditions in Venezuela have forced fuel prices upwards around the world and oil markets anticipate that an attack on Iraq may lead to broader disruption around the Middle East, which supplies about two-fifths of globally traded crude.

Presently, oil prices are on average almost 60 per cent higher than they were a year ago.

Since 1980 Antigua & Barbuda has adopted a Controlled Pricing Structure, absorbing the cost in the rise of fuel and accepting gains in the lowering in cost, which over time balances out.

The Controlled Pricing Structure also ensured that the price at the pump was kept stable by variation in the Consumption Tax. This has been achieved through an agreed price build up structure between the monopoly supplier, the West Indies Oil Company Ltd., (WIOC) and the government.

All the elements of the pricing structure are fixed except for product price and Consumption Tax.

The Controlled Pricing Policy used by the government over the years meant that whenever there was an increase in product price on the market, the government experienced falling Consumption Tax yield.

This is the case currently, hence, in the long run the price of fuel at the pump remains relatively stable.

The present market trend in oil prices with the Controlled Pricing Policy in place will produce a significant loss in revenue from Consumption Tax from the importation of fuel and poses a considerable threat to the government’s ability to service its financial obligations.

The Flexible Pricing Structure will become effective upon the arrival of the next shipment of fuel ordered by the West Indies Oil Company Ltd.

The SUN spoke to several Service Station operators, last night, who were not aware of this new development.