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PSOJ says Petrojam not passing lower oil prices to consumers

KINGSTON, December 2014 - The Private Sector Organisation of Jamaica (PSOJ) says research it has done suggests that Petrojam, the State owned oil refinery, has been passing on less than half the reduction in gasoline prices to the market.

The analysis comes against the background of  consumers raising concern that they have not been seeing the full impact of the oil price reduction at the pumps.

"The PSOJ is urging that the same response to price movements be maintained when prices are going up or down, especially as PCJ is in a monopoly situation, and recognizing that costs from oil prices remain a significant charge to productivity in Jamaica," PSOJ President William Mahfood said Monday.

"We must bear in mind that price decreases can also create a much needed economic stimulus for consumers especially at this time of year," he added.

Petrojam bases its price movements for petrol on the U.S. Gulf Reference Price for refined fuel, such as gasoline and diesel, and not based on the price of oil.

In a price analysis for 2014 the PSOJ concluded that when oil prices increased globally, between January at US$95 per barrel and a high of US$105.24 by the end of June, PCJ's prices were more closely aligned with those movements, increasing by 10 per cent over the period.

At the pumps, gas stations hiked prices on average by less than 9%. The opposite is reportedly being seen, now that prices have been going down. 

The PSOJ says its analysis shows that as oil prices fell 28% for the period July to November, the U.S. Gulf reference price for gasoline fell 30%. However, Petrojam's price cut for the fuel was only 12%, a decline which was less than half the reference prices, which it says it uses to price its products. At the pumps the reduction was approximately nine per cent.

“At the end of June 2014, international crude oil prices started on a downward trend. The West Texas Intermediate (WTI) stood at US$105.24 … and fell to a price of US$75.24 at the end of November; this represents a reduction of US$30 (28.5 per cent) per barrel.

Over this same period, the US Gulf Coast (USGC) reference price for regular gasoline started at US$2.85 per gallon and ended in November at US$1.98 (30.5 per cent) lower, the PSOJ said in its statement.

But in response to this price reduction in crude oil prices, PCJ reduced its ex-refinery prices on all three grades of fuel by approximately 12 per cent, the PSOJ said, adding that gasoline retailers have followed the same pattern of response to cost movements.

The PSOJ concludes from its findings that when oil prices rise, Petrojam increases its prices almost in line with the higher prices. On the other hand, the response to a decline in prices from Petrojam is not the same.

The PSOJ says that has led it to conclude that Petrojam is not passing on the full decline in prices, and has urged the refinery to pass on the savings so that it can reach the consumer.

Last modified onTuesday, 23 December 2014 00:44

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