PETROJAM Limited, the nation’s oil refinery, indicated that it reduced gas prices by 25 per cent in six months or greater than levels found at gas pumps in Miami, USA.

It comes as global oil prices dipped by nearly half to US$58 a barrel over six months and as some Jamaicans, including Energy Minister Philip Paulwell, question whether gas prices are being propped up artificially.

But the refinery, in a just published notice entitled ‘Gas Prices Explained’, reasoned that its pricing strategy was “fair and transparent”. It stated that at the “retail level”, for the period June 2014 to December 2014, Petrojam’s ex-refinery prices for 87 and 90 gasoline dipped by approximately 25 per cent.

“This closely correlates with price movements over the same period in Miami, Florida where the price of regular gasoline has been reduced by 24 per cent and by 19 per cent for premium gasoline over the same period,” stated Petrojam in the notice.

The Government no longer regulates gas pricing, but its refinery sets the benchmark pricing from which marketing companies add a mark-up. Paulwell was scheduled to meet with gasoline marketing companies last week to discuss the issue of pricing to the consumer.

“Therefore, while movements in the market price of crude oil are generally reflected in the refined product prices, it is not the only determinant of final product prices. Other elements are involved,” stated Petrojam. “Petrojam’s ex-refinery pricing policy is based on internationally recognised practices and stipulates that whenever price changes occur in the international market, they should be generally reflected in local prices. Similarly, changes up or down in Government of Jamaica taxes, and in the exchange rate, also affect product pricing accordingly.”

Media usually reference movements in the West Texas Intermediate (WTI) prices, which is the most widely quoted benchmark for crude oil in the US. However, Petrojam indicated that its prices are indexed to the US Gulf Coast Reference (USGC) prices, a benchmark for finished products.

“It is important for persons to be able to make this distinction, as quite often, persons, upon hearing updates of WTI price changes, tend to misinterpret movement in crude oil prices as product price movements,” stated Petrojam. “Reference prices for petroleum products, as reported by different market hubs, for example for the gasoline prices in the USGC, will be relatively higher than WTI crude prices, as they reflect transportation costs between the regions, differences in gasoline quality and regional supply-demand balances.”

Two weeks ago, Richard Byles, co-chair of the Economic Programme Oversight Committee (EPOC), said that the fall in global oil prices would serve to increase the dwindling purchasing power hurt by the depreciating local currency.

“So when you and I go to the pumps, and [when we] pay our electricity bills, we should see a step back from our previous bills. That is like putting purchasing power in the hands of hundreds of thousands of individuals,” Byles said, adding that a 45 per cent drop in oil should result in about a 15 to 20 per cent year-on-year drop in consumer light bills.

Prices at gas station pumps have dropped at half that of the global oil prices between July and the end of October, according to the latest official data from the Consumer Affairs Commission (CAC). Specifically, the popular 87 octane gasoline dipped 9.8 per cent from $125.80 to $113.55 between July and October 23 across the island’s service stations. Over the same period, crude oil prices per barrel dipped from US$103 to US$82.80 or 20.2 per cent. The CAC is yet to release its November data.

— Steven Jackson