Thu | Oct 19, 2017

Gas prices still too high

Published:Thursday | November 6, 2014 | 12:00 AM

THE EDITOR, Sir: The defining trait of Jamaican gas prices over the years is fluctuation and public opinion hasn't recovered from the whiplash.

Many, however, see the recent price drop as a rare bonus with good timing. A common sentiment: Celebrate, but don't get used to it.

The big question: Are consumers getting their fair share from the reduced oil price on the world market? Is Petrojam passing on the reduction in correlation to benchmark factors?

Whenever the gas price spikes, Petrojam blames the movements in oil price and the exchange rate.

Petrojam, the regulator for setting the gas price, uses two major factors for setting it: the Jamaican exchange rate and the cost per barrel on the world market.

In February 2014, the oil price on the world market was US$93.44, the Jamaican exchange rate was $108.34 to US$1, and the price per litre of 90 octane was $122.74. As at October 2014, the oil price on the world market is US$78.78, the Jamaican exchange rate is $112.76 to US$1, and the price per litre of 90 octane is $114.11 (supplied by Petrojam).

Based on these figures, the world oil price declined by 15.7 per cent; the Jamaican exchange rate increased by four per cent, and the price per litre of 90 octane declined by only seven per cent.

Let's say, accumulatively the increase of four per cent on the exchange rate and a reduction of seven per cent on the price per litre of 90 octane is 11 per cent. What happened to the other four per cent saving on the price per barrel on the world market?

JOHN MCINTOSH

jpmcintosh@hotmail.com