In a coun­try that has seen fu­el prices in­crease by six times be­tween 2016 and 2022, the Unit­ed Na­tion­al Con­gress’ (UNC) cam­paign promise that those prices would fall ap­pealed to many peo­ple look­ing to save on their ex­pens­es.

While much has been said about the fea­si­bil­i­ty of many of the UNC’s cam­paign promis­es, the abil­i­ty to achieve this promise may ac­tu­al­ly have its roots in a sug­ges­tion made by the for­mer ad­min­is­tra­tion.

Since his pre­sen­ta­tion of the 2020 bud­get, for­mer fi­nance min­is­ter Colm Im­bert hint­ed at the lib­er­al­i­sa­tion of the fu­el price mar­ket.

In the 2023 bud­get, de­liv­ered on Sep­tem­ber 26, 2022, Im­bert an­nounced in­creas­es in the price of pre­mi­um and su­per gaso­line, which went up by $1 to $7.75 and $6.97 re­spec­tive­ly. The price of diesel was raised by $0.50 to $4.41 with Im­bert out­lin­ing the process which could al­low for the fluc­tu­a­tion of prices.

Dur­ing his con­tri­bu­tion to the 2023 bud­get de­bate, for­mer prime min­is­ter Dr Kei­th Row­ley said based on the cal­cu­la­tions at the time, at an av­er­age price of US$85 a bar­rel for oil, the price of pre­mi­um gaso­line should drop to $6.92 while su­per would drop to $6.66. If the in­ter­na­tion­al price of oil dropped to US$80 bar­rel, Dr Row­ley said pre­mi­um gas should fall to $6.28 and su­per to $6.05, while at an in­ter­na­tion­al oil price of US$75 a bar­rel, pre­mi­um should fall to $5.68 and su­per would de­crease to $5.43.

En­er­gy econ­o­mist Gre­go­ry McGuire said this was ex­pect­ed to be a step to­wards lib­er­al­i­sa­tion of the mar­ket but it was nev­er ac­tioned.

“This was a step in lib­er­al­is­ing the mar­ket, mar­ket lib­er­al­i­sa­tion. They had put a mech­a­nism in place that would al­low for ad­just­ments of the price of gaso­line at the pump, right as in­ter­na­tion­al oil prices moved,” said McGuire.

On Fri­day, the spot price of Brent crude oil was US$61.43 per bar­rel, while West Texas In­ter­me­di­ate trad­ed at US$58.38 per bar­rel.

McGuire said that giv­en the cur­rent price of oil, which is sig­nif­i­cant­ly low­er than the quot­ed price in the bud­get, mo­torists should be pay­ing less at the pump.

“What ought to hap­pen now is that the price at the pump needs to be re­duced al­most au­to­mat­i­cal­ly,” said McGuire,

“It means if oil prices is as low as US$70 or US$69 or US$68 a bar­rel that we are ac­tu­al­ly pay­ing a tax on gaso­line, be­cause the equiv­a­lent pump price should be much low­er. It should be at least $1 low­er.”

But that process has not come to be, and it is still to be seen if the new gov­ern­ment will im­ple­ment the mea­sure.

While many have linked the in­crease in gaso­line prices to in­creased costs, par­tic­u­lar­ly in the re­tail sec­tor, McGuire did not fore­see a drop in those prices should the gaso­line price be re­duced via this method.

“Giv­en the na­ture of the mech­a­nism I don’t think you’ll see any ad­just­ments at all in the prices of gro­ceries or taxi fares,” he said.

“I don’t ex­pect a wide range of prices to fall for two rea­sons. One, we don’t have a his­to­ry of re­duc­ing prices of goods and ser­vices when prices of fu­el goes down. You will re­call that sev­er­al prices went up dur­ing the COVID-19 pan­dem­ic. I don’t know that we’ve seen an ap­pre­cia­ble re­duc­tion in those prices af­ter the whole ship­ping cri­sis re­turned to nor­mal,” McGuire said.

“Sec­ond­ly, I don’t think prices of goods and ser­vices, re­tail goods, in par­tic­u­lar, on the gro­cery shelves (will go down) and I don’t think im­porters, man­u­fac­tur­ers or even dis­trib­u­tors will ad­just those prices be­cause of what they would know is a tem­po­rary re­duc­tion in oil prices or a tem­po­rary re­duc­tion in gaso­line prices at the pump.”

How­ev­er, stake­hold­ers in the in­dus­try are not con­vinced the in­fra­struc­ture is in place to sup­port the lib­er­al­i­sa­tion of the mar­ket.

Pres­i­dent of the Pe­tro­le­um Deal­ers’ As­so­ci­a­tion, Robin Narayns­ingh said, “In our in­dus­try, in our in­fra­struc­ture, and just a few big gas sta­tions are in a po­si­tion to com­pete. But I would not rec­om­mend that at this time. I think we have to build up our in­fra­struc­ture so that we can be a lit­tle more ser­vice-ori­ent­ed to­wards the mo­torists and the pub­lic. And we can on­ly do this if you build up the in­fra­struc­ture and have a good man­age­ment sys­tem in Na­tion­al Pe­tro­le­um.”

He al­so not­ed that ad­just­ing the price at the pump had oth­er eco­nom­ic im­pacts that would need to be con­sid­ered.

“A re­duc­tion in the price de­pends on how much you buy it for, and how much you are will­ing to sub­sidise it, or if the coun­try could af­ford to sell it (at that price),” said Narayns­ingh, who felt that such a move should in­volve a dis­cus­sion with the var­i­ous stake­hold­ers. A dis­cus­sion he felt was long over­due be­tween mem­bers of the in­dus­try and the Gov­ern­ment.

“This promise is a promise made in good faith, but it was made with­out all the in­for­ma­tion the coun­try could af­ford. So I wouldn’t hold the Prime Min­is­ter to some­thing like that. But at the same time I would like to see her get some­body from the Pe­tro­le­um Deal­ers’ As­so­ci­a­tion (PDA), on the NP board, to have some mean­ing­ful dis­cus­sion, be­cause the Min­is­ter of En­er­gy in the past, nev­er met with the pe­tro­le­um deal­ers,” he said.

He said the fu­el dis­tri­b­u­tion in­dus­try has been mar­gin­alised and ne­glect­ed. And even though the PDA has a judg­ment in its favour, noth­ing has tak­en place.

“No­body reached out to us to put things in place. So hope­ful­ly we wait for the Min­is­ter of En­er­gy, who­ev­er it is, so we can go for­ward,” said Narayns­ingh.

Own­ers Deal­ers As­so­ci­a­tion (ODA) pres­i­dent Reval Chat­ter­goon al­so felt the ad­just­ment would re­quire a lev­el of nu­ance and col­lab­o­ra­tion.

“In terms of cam­paign promis­es about re­duc­ing the price of fu­el at the pump, that will be par­tic­u­lar­ly in­ter­est­ing if they do it. Of course, there is some room for price fluc­tu­a­tion that they can use. Of course, we know that the price at the pump is de­ter­mined by the oil prices. The low­er the price of fu­el or oil means the low­er the price of fu­el at the pump. How­ev­er, it al­so means re­duced earn­ings for the coun­try from the sale of crude oil by Her­itage Pe­tro­le­um at the same time. Now, if one is to con­sid­er re­mov­ing that al­to­geth­er, it will have a ma­jor im­pact on the price at the pump and for every oth­er com­mod­i­ty as well.”

Like Narayns­ingh, Chat­ter­goon felt the gov­ern­ment need­ed to con­sult with deal­ers con­cern­ing the next step.

“Prime Min­is­ter Kam­la Per­sad-Bisses­sar (said) they will rep­re­sent the for­got­ten. Gas sta­tion deal­ers, es­pe­cial­ly own­er deal­ers is an in­dus­try that cer­tain­ly has been for­got­ten as in­vestors in this sec­tor. Be­cause you have peo­ple who do not in­vest in a sta­tion mak­ing the same per litre as peo­ple who ac­tu­al­ly build and have all the equip­ment, which does not make sense,” he said, “So we cer­tain­ly look for­ward to things like this.”

Chat­ter­goon al­so sug­gest­ed there were oth­er ad­just­ments that could be made at NP, which could re­duce ex­pen­di­ture and ul­ti­mate­ly al­low for the gas sta­tions and the pub­lic to en­joy bet­ter prices, how­ev­er, he stressed a con­ver­sa­tion need­ed to be had with stake­hold­ers.