May 7, 2015
Private Sector Groups Concerned about Fuel Pricing Policy
The Jamaica Chamber of Commerce (JCC), the Jamaica Manufacturers Association (JMA), and the Private Sector Organisation of Jamaica (PSOJ,) are calling on the government to revisit the Common External Tariff (CET) regime on imported fuel as this mechanism has cost the country approximately US$65 million annually, on average, over the last ten (10) years.
The private sector bodies are of the view that the current arrangement between Petrojam and Petrotrin (Trinidad and Tobago’s state owned oil company) in respect to the sale of refined fuel to Jamaica, is exploitative, as it results in a premium of conservatively 8% on average, which is added to the prices set in the international market. Under this current arrangement, Jamaica buys refined fuel products from Petrotrin to avoid paying a ten percent (10%) CET. This therefore renders goods and services produced in Jamaica uncompetitive for sale in regional and global markets. This additional cost of energy is thereby channelled into the general prices in the economy.
On average, over the last 10 years, Jamaica purchased approximately US$1.82BN worth of petroleum and other types of fuels from a number of countries including Trinidad and Venezuela. Most recently over the last 5 years, the average annual fuel bill is approximately US$2.04BN. Jamaica purchased approximately 49.3% of its fuel imports as refined products from Trinidad and 50.7% as crude.
In 2014, Jamaica purchased approximately 48.3% of the fuel as refined fuels; the value of this was approximately US$911.5 million. Without this premium, Jamaica would have saved approximately US$67.5 million in 2014 alone.
The total cost of this purchasing and pricing policy over the 20 years is approximately US$859.2 million.
The pricing policy of Petrotrin represents an additional 3.6% of Jamaica’s fuel bill.
It is also important to note that this represents only the direct cost to the country. Indirect costs include (i) the loss of price competitiveness which translates into lower sales of locally produced goods and therefore sluggish economic growth performance, and (ii) foregone infrastructural and other development.
We also note that Petrojam is in breach of the Public Bodies Management and Accountability Act, by not having presented audited financial statements since 2012, and we call on Minister Paulwell to ensure that there is accountability for this breach. This is unacceptable as Petrojam is probably the largest public sector body in terms of funds generated.
The private sector bodies are calling on the Minister to investigate this matter, and the internal operations at Petrojam, to ensure that businesses and consumers receive the full benefit of recent significant price reductions globally.
Contact: Ms. Kareen Cox, Marketing & Public Relations Manager, PSOJ
Tel: 927-6238 (Ext. 2052); Fax 978-2709