LET ME ASK YOU, dear reader: Do you consider the Government’s response to the precipitous fall in world oil prices to be “timely”?
I’m only asking because of the two recent reductions in fuel prices, on December 19 last year and last Monday January 12, exactly three weeks apart at the stroke of midnight.
As for me, I think we need another midnight hour, in terms of fuel reduction. After reducing the price of gasoline from $3.57 to $3.24 per litre just before Christmas, the Division of Energy cut it against last Monday to $2.83 per litre. Taking both together, the price per litre of unleaded gasoline was reduced by 74 cents, or close to 21 per cent, in just 21 days. How great is that? Turns out, not so great.
The Government sayd it has a “mechanism in place to adjust petroleum prices in a more timely fashion . . . in accordance with the imported price of petroleum products.” (Barbados Government Information Service release, December 21, 2014). Here is that mechanism at work in 2014:
In January, with Brent crude close to US$111 per barrel, the price of a litre of gasoline was $3.14. On April 1, when Brent had actually dropped by about $2 a barrel, the price of gasoline was raised to $3.42 per litre. In May, when the price per barrel went up another dollar, the gasoline price was raised by 18 cents, to $3.60. In June, when the price of oil went up again two dollars, gas at the pump was reduced by five cents, and when the Brent price fell by five dollars the following month, it was raised back to $3.60.
There it languised for the remainder of the summer. To continue, when Brent actually dipped below US$100 in September, the “mechanism” which sets local fuel prices brought the price of unleaded back down to $3.50, still 32 cents more than the $3.18 set by the mechanism when the Brent price was ten dollars higher, back in March.
When Brent dropped another ten bucks in October the local gasoline price was raised again to $3.60 per litre. Can somebody explain to me how the mechanism could raise the price of gasoline back to $3.60 after oil prices had dropped for four straight months?
And when they fell another ten months in November, to just over US$78, gasoline was lowered by just three cents - to $3.57 per litre. By December, it was clear something had to be done, what with oil now around US$60 per barrel. So gasoline was reduced to $3.24, still six cents higher than the $3.18 price set by the “mechanism” when the price of Brent crude was almost double, at US$109 per barrel. So the latest correction was made.
Now, our frends at Barbados Light & Power Co. Ltd. (BLPC) also have a mechanism of their own, the Fuel Clause Adjustment (FCA). The company says, “We would like our customers to see this mechanism as transparent. As the oil prices fluctuate, so will our Fuel Clause Adjustment (FCA) mechanism. . .”
In an email I received from the company, the BLPC states that “In August 2014, the Fuel Adjustment was 46.35 cents per kWh, (and) this month, January, it is 22.75 cents per kWh, the lowest since June 2009.” There followed a chart showing the decline of the FCA over the six month period, August to January. But I couldn’t understand why the company only showed us its FCA rate from mid-year on. I found a few pre-August bills and got, shall we say, a fuller picture.
In March, when Brent averaged US$108. 73 per barrel, the FCA charged was 37.4 cents per kWh; in April, when the Brent average was almost the same, the FCA on my bill went up to 39.3 cents. In May, when Brent went up slightly to US$109.68, the FCA was raised to 41.5 cents; and similarly, in June when Brent went up to US$111.87, the FCA was raised to 42.7 cents.
All fair, you say? Okay, so why is it that in July, when Brent fell to US$106.98 – that is, a drop of US$5 per barrell – the FCA still went up, to 44.5 cents? And why, in August, when Brent averaged US$101.92 - another US$5 per barrel drop - the FCA was raised again, to 46.4 cents?
Like the Government, in my humble opinion, the BLPC opened the new year trying to play catch-up, having effectively overcharged its customers by not lowering the FCA in a more timely and transparent manner during most of last year.
My own number-crunching mechanism (the old brain) is recommending the BLPC give us a very transparent credit on our next bills for so doing. It doesn’t need to wait, like Government, for the midnight hour.