Petrojam pricing mechanism under review

BY LUKE DOUGLAS Senior staff reporter douglasl@jamaicaobserver.com

Thursday, February 09, 2012

THE mechanism employed by Petrojam for calculating the price of petroleum products is currently under review by the government, a senior source in the Ministry of Science, Technology, Energy and Mining has disclosed.

The source, who asked not to named, told the Observer yesterday said that the issue was high on the agenda of Minister Phillip Paulwell, especially against the background of the prices at the pumps, which have increased for the last seven consecutive weeks.

"We're actively looking at (the way gas prices are calculated) while keeping the consumer in mind. The new administration has not had the time to address all the questions, but we're looking at the work that has already been done and it certainly is on the minister's agenda," the Observer was told.

Also yesterday, Paulwell met separately with representatives of the Jamaica Gasolene Retailers Association and the Jamaica Association of Petroleum Marketers, the Observer learned.

According to Petrojam's website, prices of E10 (87) gasolene have increased at the pumps every week since December 22 last year, moving from $93.72 then to $100.28 at present. Meantime, E10 (90) and diesel fuel showed similar increases, moving from $95.37 and $98.91 respectively on December 22 last year to $101.93 and $103.93 today.

On Tuesday, opposition spokesperson for industry, commerce and energy, Gregory Mair stated that Petrojam's pricing mechanism was "deeply flawed" and tabled a series of questions in Parliament seeking clarification from Paulwell on the matter.

Mair said an assessment of Petrojam's pricing mechanism could "ultimately directly affect the price of electricity for the Jamaican consumer" at this time.

Mair called on the minister to give a detailed explanation of Petrojam's pricing formula and to state whether he believes it reflects Petrojam's costs.

He also asked whether an entity other than Petrojam should administer the pricing and asked if this would bring costs down.

According to Petrojam's website, the US Gulf Coast (USGC) prices form the basis of its ex-refinery prices. Petrojam said its main trading partners, Mexico, Venezuela and Trinidad and Tobago, also use the USGC prices.

But early last year, an audit done by the United States-based consulting firm Centennial Group concluded that the cost of petroleum and related products could be much lower if Petrojam changed its pricing mechanism.

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Petrojam pricing mechanism under review