By Lavern Clarke, Staff Reporter
Jamaica now produces 7,200 barrels of gasoline per day, or 1.14 million litres/day. - File
WORLD EVENTS in the oil industry, coupled with seasonal changes in the local gasolene market have pushed pump prices significantly higher, with expectations that they will remain high for now.
President of the Jamaica Gasolene Retailers Association, Lloyd 'LG' Brown, says the sector has seen what he described as its "most dramatic move" in pump prices of an average $1.14 per litre over the past week, occasioned by supply and demand factors.
As a result gas prices in Kingston ranged higher between $23 and $26.50 per litre for unleaded 87 octane as at Wednesday, and almost two dollars higher across the range for unleaded 90. But new reference prices issued by the monopoly refinery Petrojam to take effect Thursday is expected to trigger another increase at the pumps by today.
"Generally, prices are increasing wherever you go," said the JGRA president who operates Esso stations at 100 Lane and Dunrobin/Constant Spring in St. Andrew.
A two month look back at Petrojam's prices show a dip in weekly prices for the month of November to a low of $18.247 for 87 octane, which were reversed in a consistent upward climb in December. The movements added $3.21 to the current base price.
The refinery this week billed unleaded 87 at $21.455; unleaded 90 at $22.619; and diesel $20.350.
"Traditionally at this time (Christmas season), prices do go up," says Brown, adding that increases are inevitably passed on through the supply chain to the consumer.
But more significantly, with the oil strike in Venezuela now in its fifth week, Jamaica has been forced to source its oil on the open market at prices that do not give the same 'preferential rates' as negotiated with Mexico and Venezuela under the San Jose and Caracas Energy Accord oil purchase facilities.
Petrojam acting general manager, Christopher Chin-Fatt, said Jamaica paid approximately $22 per barrel for the 370,000 barrels of oil it sourced from Ecuador over Christmas, noting that it was a lower quality crude than the Venezuelan product and not likely to give the same output for finished products.
Production in Venezuela, the fifth largest oil exporter worldwide, has been cut to about 200,000 barrels a fraction of its average 3 million barrels per day, and North American demand for heating oil has seen "fuel supplies diverted to that end of the market," Brown said.
Additionally, with a US/Iraqi war seeming almost certain, speculators have been stockpiling crude, which has helped to drive up prices above $32 per barrel. On Thursday Brent crude was at $30.60.
Locally, the situation in the gasolene retail market is compounded by the dollar's depreciation relative to the US dollar as well as transportation expenses, including the cost of moving the gasolene across the island.
Pump prices in Montego Bay and rural townships ranges up to $3 higher than corporate area prices, depending on the distance from the point of origin of supply, among other factors, Financial Gleaner checks have shown.
The JGRA president said retailers had no concerns about supplies for January, but he insists that Jamaica needs to start consuming the product more judiciously, given emerging international events.
"We should have been conserving a long time ago."
Jamaica now churns out 7,200 barrels of gasoline per day, or 1.14 million litres/day, says Chin-Fatt.
Retailers linked with the three multinationals, Esso, Texaco and Shell, are supplied by the marketing companies who in turn buy from Petrojam. Retailers buy at the marketing companies' marked up price, who then indicate to the service stations what the 'Suggested Maximum Retail Price' should be.
"It is coined as such because of Fair Trade Commission regulations," said Brown. But, given he said that Shell and Texaco "also uses agencies who sell at their dictated price", retailers tend to operate within the margin.
Brown said having to operate at fixed margins adds to the disadvantage that retailers start off with - 'evaporation loss'. Retailers some 1.5 to 2 per cent on the litre to evaporation based on the fact that the product is a hydrocarbon and requires venting.
"For every litre, we are only able to sell 98.5 per cent of it," said the JGRA president.
He adds that the retailers are also now faced with increased licensing fees which took effect Wednesday, as well as wage negotiations on the 70 per cent increase requested over two years.
To diversify their revenue streams, retailers have been moving more aggressively into what Brown called "side services" - food and car care. At the high end, a station with a convenience store can earn 35 per cent off services and 65 per cent off gasolene, but the station without the food store is more likely to have a 20/80 per cent revenue split, said Brown.
