Petrojam not milking motorists
Latoya Pennant, Guest Columnist
With reference to letter to the editor titled 'Gas prices still too high', by John McIntosh (Gleaner, Thursday, November 6, 2014) and 'Petrojam punishing motorists (Friday, November 7, 2014), Petrojam Limited wishes to respond to questions posed and clarify issues raised.
Is Petrojam passing on the reduction in correlation to benchmark factors?
Yes. Product-price movements announced weekly by Petrojam, upward or downward, generally correlate with movements in the US Gulf Coast (USGC) Reference prices for finished products. The USGC is the international benchmark to which Jamaica's petroleum-product prices are indexed.
At the retail level, for the period June 2014 to October 2014, ex-refinery prices for 87 and 90 gasolene have been reduced by approximately 15 per cent. This closely correlates with price movements over the same period in Miami, Florida, which also uses USGC prices, where the price of premium gasolene has been reduced by 12 per cent, and by 16 per cent for regular gasolene over the same period.
Price movements at Petrojam reflect movements in foreign-currency exchange rates and changes in the US Gulf Coast Reference prices for finished products, not changes in crude oil prices, as was expressed. Reports in the local media are usually on movement in West Texas Intermediate (WTI) prices, which is the most widely quoted benchmark for crude in the United States.
It is important for persons to make this distinction, since very often, as it was in this instance, movements in crude-oil prices are misinterpreted as product price movements.
Are consumers getting their fair share from the reduced oil price on the world market?
Yes. Whether there are price increases or reductions, the price movements announced by Petrojam weekly are competitive and are generally reflective of current market conditions for the relevant products. Petrojam's ex-refinery pricing policy is based on internationally recognised practices and stipulates that whenever price changes occur in the international market, they should be reflected in local prices. Similarly, changes up or down in GOJ taxes and in the exchange rate also affect product prices accordingly.
Is Petrojam the regulator for setting gas prices?
No. Petrojam is an important part of the landscape for petroleum-product supply. However, it is by no means the only player operating in the deregulated and liberalised Jamaican market. Petrojam's prices reflect Petrojam's own assessment of market prices from time to time based on commercial considerations. There are other participants in the market that import products directly and are free to set their own prices accordingly.
Petrojam acknowledges that the prices of our products are of acute interest to the public and to policymakers. They are critical to households, the transportation and manufacturing industries, and the economy as a whole. At all times, the company seeks to be fair, open and transparent in its pricing strategy, as we endeavour to fulfil our mission of providing petroleum products at competitive price.