Jamaica Must use US Gulf Reference Price to Purchase Oil – Paulwell

Minister of Commerce, Science and Technology, Phillip Paulwell has reiterated that Jamaica was not in a position to stop using the US gulf reference price to purchase oil.
“As long as we do not produce oil, then just about every aspect is imported and is foreign directed, and so we have nothing to do with the prices. We have to purchase based on the reference price that our supplier uses, and in our case it is the US gulf price that they use,” the Minister told JIS News in an interview today (October 1).
The Minister also explained the rationale for using the gulf reference price. “We do not produce the product, we have to purchase it and in procuring crude oil, for example, the basis on which we buy crude, whether from Venezuela or Mexico, is to use what is called the West Texas Intermediate Basis, which is the US gulf reference price and that is set and that is what we have to honour,” he explained.
Mr. Paulwell added that if Jamaica was purchasing the raw material using this basis, then it was only logical and straightforward to go back to that reference price in terms of the finished products. “That is how it has been established under a regime.and we have carried it forward because it makes sense,” the Minister said.
On the recent PetroCaribe agreement, the Minister made it clear that Venezuela was able to offer Jamaica the special concessionary financing arrangement, but they were not in a position to offer discount on the prices. “As a member of the Organization of Petroleum Exporting Countries (OPEC), they cannot sell at prices below that which that cartel operates at, and so we have to purchase at the world market price using the US gulf reference price, and so we cannot at this time offer discounts to the public,” Mr. Paulwell explained.
The Minister pointed out, however, that when the state owned refinery (Petrojam) was expanded and upgraded, the country would be in a position to purchase a cheaper crude from Venezuela, that would result in a reduction in prices being passed on to the consumer. The refinery expansion is expected to be completed in the next two years.
“It will be only at that time after the refinery has gone through this upgrade, that we will be able to pass on those lower prices to the consumer,” the Minister told JIS News.
Commenting on the Government’s directive to Petrojam to absorb a percentage of the increase to consumers this week, Mr. Paulwell said this was just a one-off situation.
“The government on Wednesday (September 28), took the decision when we were advised that the price of the product would move by about $9 per litre, that because it is perceived that the US gulf reference price has been driven largely by the two hurricanes and that there was some anticipation that in the coming weeks, things would go back to some normality, that we could absorb this for this week. However, if the prices are not lowered by next week, then we have to pass on the full increase to the public,” he said.
For now, there can be no prediction as to what will happen with these prices, and the Minister noted that as long as the perception is maintained that there is a shortage of the commodity and that there are problems in the Middle East as well as an increase in demand in China and India, “there is absolutely no control over where the price will go”.
“We just have to, in our way, try and conserve and be more efficient users of what we are consuming,” he said.
The Minister pointed out that Jamaica was leading the way in the region in regard to alternatives to oil. “Through PetroCaribe, we have been able to advance for greater amount of resources to be placed in the region for more work to be done in the use of wind energy, solar, hydro power, bio-mass and bio gas,” the Minister said, adding that by early next year, Jamaica would be moving towards expanding the Wigton wind farm in Manchester.