Petrol Price Market Determined – Petrojam

The government of Jamaica is not using the pricing mechanism of the state-owned refinery, Petrojam, to jack up the price of petrol in order to benefit from increased tax revenues.

This was stated by General Manager of Petrojam, Winston Watson, on April 4, during a question and answer session on the topic: ‘Understanding Petrojam and its role in Jamaica’s Energy Market’ held at the company’s Marcus Garvey Drive facility in Kingston.

Emphasising that the company’s pricing mechanism is transparent, fair and market determined, Mr. Watson explained that Petrojam, although a dominant player in the petroleum market, is not a monopoly.

He said that marketing companies that compete with Petrojam are free to import finished products and make them available to the consumer at independently determined prices.

The Petrojam boss said that calls that the government should consider deregulating Petrojam are pointless as “the market has been deregulated”. He added that Petrojam, although owned by the people of Jamaica does not receive a government subsidy and is totally self-financing.

Another misconception, Mr. Watson said, is that the Jamaica Public Service Company Limited (JPS) is forced to purchase fuel from the state-run facility. This, he said, is untrue, as the light and power company is free to determine its fuel source, largely based on price competitiveness.

In recent weeks, in the wake of the ‘Arab Spring’ (social and political unrest in a number of Arab States), compounded by the blustering of the Iranian Regime in the face of efforts to halt its nuclear programme, oil prices have been on the increase.

Oil dependent states such as Jamaica, which import over 90 per cent of its oil supply, have been hard hit, more noticeably at the petrol pumps.

Although just over 70 per cent of Jamaica’s crude oil or some 23,000 barrels per day is satisfied by the PetroCaribe deal with Venezuela, the cost of imported crude is market-determined based on the price of the ‘West Texas Intermediate Crude’.

Under the PetroCaribe deal, the cost of Venezuelan crude is credited to Jamaica at a concessionary rate. 

By Allan Brooks, JIS Senior Reporter