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Oil price plummets to below $US50 per barrel…

Nov 22, 2008 News

AFC adamant that December electricity rates should reflect this

…but PNCR demands immediate reduction

 

Alliance For Change Chairman, Khemraj Ramjattan, says that in light of the fact that the price of oil on the world market has dropped to below US$50 per barrel, the December electricity rates should reflect that reduction.

This position by the ACF chair is in light of a recent announcement by Prime Minister Samuel Hinds that, if the price were to fall below US$50 per barrel and remain below that mark, a decrease in electricity rates would be possible.

The comment was made in response to a question about when a possible reduction could be seen in fuel prices, and at the time there was already a significant decrease in oil prices on the world market, then down from a high of US$147 per barrel to below US$65 per barrel.

Present day prices indicate that benchmark crude fell as low as $48.50 a barrel on the New York Mercantile Exchange, levels last seen on May 18, 2005, when oil hit $46.80 a barrel.

This is in light of the fact that the GPL was then operating at just about break-even, when one considers its revenue against the total cost of operations, with fuel supply being one of the largest expenses.

Earlier in the year, the total cost of operations far outweighed the revenue generated, which prompted the Government to inject more than $3B into the company.

Another factor compounding the situation is the fact that the GPL is faced with 33 per cent technical and commercial losses.

This is a minimal reduction, as reported earlier, and the fact that the company has been more or less strapped for cash is the reason behind the very minimal decrease of about three per cent, given that the company had to almost cease investment in reducing the losses.

Ramjattan posited, however, that he was almost certain that the administration would respond to the AFC’s call in the same way most minibus drivers responded to the reduction in fuel prices, blaming increased expenditure on spare parts. As such, the company will claim that it cannot reduce its charges.

Meanwhile, People’s National Congress Reform executive member Aubrey Norton, in an invited comment, said that there should be an immediate reduction in the electricity rates.

He drew reference to the fact that the Government was demanding a reduction in minibus fares as a result of the said reduction of fuel prices.

Norton added that a reduction of electricity will have a positive ripple effect on the country, in that there would be increased economic activity, resulting in growth of the economy, with increased revenue for the state.

He noted that it would also give a little more to the average Guyanese, in that it would be additional money in hand to spend on other needs, such as food.

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