Energy Ministry to Discuss Fuel Price Publication with Consumer Affairs Commission

Discussions are slated between the Ministry of Science, Energy and Technology and the Consumer Affairs Commission (CAC) regarding the publication of fuel prices.

This, to enable consumers to make informed decisions when purchasing the commodity.

Speaking at the Petrojam Private Sector Breakfast Forum at the AC Hotel by Marriott Kingston on Wednesday (September 21), Portfolio Minister, Hon. Daryl Vaz, said the dialogue will facilitate the creation of a Memorandum of Understanding (MoU) between the entities.

The event sought to educate private sector stakeholders about Petrojam’s pricing mechanism.

“There has to be a partnership, and I can remember very well when there was volatility in the food prices, and I remember those double page ads in the green and the red. The green was a go and the red was no go, and you saw the effect of it. You have to give the people the information to allow them to make that decision,” the Minister said.

He added that “right now, they know of a particular place that they usually buy from… they think it’s low, maybe lower; and, therefore, it is a function of information going out there.”

“So I am going to encourage a discussion, outside of this meeting, to take place as soon as possible, and to come up with a MOU in relation to how that (fuel price publication) will happen and how frequent,” Mr. Vaz added.

Details of the food prices are published in the country’s major newspapers.

Explaining how Petrojam’s ex-refinery prices are set, General Manager, Winston Watson, said this undertaken weekly, based on the principle of import parity pricing.

He said import parity determines the price at which to bring finished products into Jamaica, that any importer would incur, adding that the US Gulf Coast price is relevant because it is part of the pricing reference the industry uses.

“Almost all the traders in the Caribbean region… in this part of the world… use the US Gulf Coast as their reference price. It’s a very big market, it’s very transparent, and it is not easily manipulated by small players,” Mr. Vaz pointed out.

He added that “if you only had two players in it, you could get the market being manipulated.”

“But when you have a US Gulf Coast, you have thousands of traders going in and out; it’s not a market you can manipulate, that’s what we use,” he said.

Mr. Watson advised that each product will have its own price, noting that the market for crude oil in the US, Latin America and Caribbean region uses the West Texas Intermediate.

“You do not put crude oil in your car, you put gasoline or diesel. Whenever you hear the market [stakeholders] talking on the news, you hear them talk about oil prices going up; they are talking about crude oil… 99. 9 per cent of the time; you very rarely hear them talk about gasoline prices going up. So you can almost ignore it when they say that, because the market is different for crude as it is different for finished product,” he said.

The ex-refinery price is the figure at which finished products are sold to the various customers. They include marketing companies, power companies, bunker customers, such as ship operators, and airlines through intermediaries.

“It is the supply/demand relationship that is driving the prices up and down,” Mr. Watson explained, adding that the effect of the Russia/Ukraine conflict is also a factor.

Ex-refinery prices are set by a group including: the General Manager, Logistics and Marketing Manager, Financial Treasurer and Budget Planner, Cost Accountant, representative from the Ministry of Finance and the Public Service, Chief Financial Officer, Supply Optimisation Advisor, Chief Accountant, representative from the Ministry of Science, Energy and Technology, and representative from the Office of Utilities Regulations.

Mr. Watson said it is hoped that with more discussions and dialogue, persons will have a better understanding of the structure.

An important component of Petrojam’s pricing method is the application of a price-smoothing factor, referred to as the market adjustment.

This is a stabilising element which cushions the market against adverse price shocks and represents the practice of partial pass-through of changes in international prices.

Petrojam Chairman, Wayne Chen, said managing price volatility on a critical product is vital to Jamaica’s stability.

“Jamaica has never run out of fuel. The smoothing is a policy issue, not by Petrojam necessarily, but by successive governments,” he said.

Petrojam prices are adjusted weekly to ensure that local costs are consistent with movements in the international market.

The company ensures that its prices are always competitive and its pricing strategy is consistent.