ALTHOUGH a price hike at the pumps may seem inevitable, there is no need to panic just yet, as, while stocks and supplies of gasoline last, it will remain at its current price.
Industry sources told Newsday that fuel was already bought at a certain price before the price of oil and the correlating prices of fuel became more volatile because of worldwide shocks, mostly, because of Russia’s invasion of Ukraine.
However, once that supply is used up TT will have to resupply at whatever wholesale price gasoline is at the time.
Although he is not sure, Petroleum Dealers Association President Robin Naraynsingh believes that gasoline is supplied on a quarterly basis. Other industry sources said it could be supplied either monthly or quarterly.
“I think if someone makes an order for fuel they can get three months supply and it is spot buying, so you would buy it at that price. So right now you would notice that the subsidy is at work and the prices remain the same. But when the next shipment comes it may be something different,” he said.
Internationally, gasoline prices are determined largely by the laws of supply and demand. Other factors like the cost of acquiring and refining crude oil as well as distribution and marketing gasoline and state taxes are also key in determining the price.
Gasoline at the pump is determined by government which subsidises a large amount of the cost. In conversations with the Prime Minister on Tuesday, Keith Rowley said from 1997 to 2022, government spent $38.1 billion in fuel subsidies but the fund which was established to treat with fuel subsidies only contributed $9.3 billion.
“In 1997 government created a subsidy fund, meaning that anyone that produced oil in the country, a levy was attached to the gross production that you pay into the subsidy fund. That money is what is used to subsidise fuel,” Rowley explained. “There was no shortfall in the subsidy fund because it matched the subsidy itself and the subsidy was related to the price of oil.”
He added, from 1997 onward there were dramatic shortfalls in the subsidies, and Government had to find the money to maintain a subsidised price of gasoline. He said this year, for Government to maintain the subsidy in its current state – with subsidies on LPG, kerosene and diesel and a fixed price on gasoline it would have to cover a shortfall of $767 million.
Last year TT used 105 million litres of premium gasoline, along with other grades.
Paria Fuel Trading Company the sole trader of gasoline to local petroleum companies is largely supplied by Singapore-based fuel trader Trafigura.
Paria fuel trading company said there is always a concern about potential upward movement in the price of fuel as it would also affect the demand for forex and the subsidy that Government pays once prices at the pump remain unchanged.
“Paria has existing fuel supply contracts and we continue to work with our suppliers to manage the impact of the increase in price,” Paria said.
Expressing his own concern over the increases and impending affect on the pumps locally, Naraynsingh said just as TT prepares for natural disasters, it will soon have to prepare for more increases.
“We have to look at who we are as a people. Every year we prepare for storms and hurricanes and there is always some uncertainty for us as Caribbean people. This is just another test for us,” he said.