PRICE PROTEST
Gov’t urged to suspend Petrojam model amid surging oil costs
Published:Friday | March 4, 2022 | 12:08 AM
An urgent call has been made for the Government, through the state-owned oil refinery, to suspend its current pricing arrangement to ease the burden of the escalating oil prices on local businesses and consumers.
Opposition Spokesman on Energy Phillip Paulwell made the appeal Thursday even as he pointed to Petrojam’s projected $2.4 billion in profits for fiscal year 2022-2023.
Highlighting the latest surge in the Gulf price of oil to upwards of US$100 per barrel, Paulwell said that Petrojam’s pricing arrangement should be suspended to cushion the effects of the ongoing spike.
Global oil prices have skyrocketed in the wake of Russia’s invasion of Ukraine late February.
While acknowledging market volatility, Minister of Science, Energy and Technology Daryl Vaz said the Cabinet would have to discuss any proposal to alter Petrojam’s pricing model, as it would have fiscal implications.
Addressing members of Parliament’s Standing Finance Committee Thursday, Vaz sought to allay fears about oil supplies.
He said Jamaica has three to four weeks reserve of finished products and six weeks of crude supply.
“The future of Petrojam is under active consideration. However, with the current situation in Eastern Europe, our attention has been shifted somewhat to oil prices and the country’s energy security,” Vaz said.
At present, Jamaica sources both crude oil and finished products from Colombia, Brazil, Ecuador, and Barbados.
“There is no need to panic as it relates to oil supplies,” he added.
During the deliberations of the Standing Finance Committee, the issue of oil price projections for the 2022-2023 financial year was again raised by some members.
Paulwell laid bare the discrepancy between the published forecast for the average price of oil by both the Ministry of Finance and Petrojam.
In terms of assumptions on which the Budget was cast, Petrojam indicates an average price of US$79.36 per barrel for 2022-2023, while the Ministry of Finance has a forecast of US$67.5 per barrel.
He questioned whether the Ministry of Finance consulted with the lead agency in Jamaica on energy prices.
For the 2021-2022 fiscal year, the average price of oil was set at US$45 per barrel. However, the out-turn was US$73 per barrel.
Vaz said he would seek clarity from the finance ministry.