Oil plunges to US$48 per barrel, but little benefits for Guyana

Jan 16, 2015 News

World fuel prices have plunged almost 50 percent over the past year, but it is unlikely that Guyanese will feel any significant difference in their pockets anytime soon. That is because airline fares, electricity rates, diesel

The price for oil has fallen by almost 50 percent on the world market, but Guyana is yet to feel the benefits in a significant way.

and gasoline have remained virtually the same.
Imported fuel remains one of the biggest costs for Guyana, accounting for a huge chunk of foreign spending.
Late last year, Government, as prices fell from US$90 per barrel, raised taxes for gasoline from 20 percent to 40 percent. Diesel was also raised significantly from 15 percent to 35 percent at the same time.
Taxes on imported gasoline and diesel have accounted for a significant portion of the country’s revenues. With a number of sectors, like gold and sugar recording dismal performances, the windfall from the fuel tax would be a boon for revenues for Government, but little for consumers.
There has not been any reported fare drop for minibuses or taxis.
Yesterday, crude hovered around US$48 per barrel, compared to US$90 about a year ago.
Several oil-producing countries, like Trinidad and Tobago and Venezuela, have already downgraded their growth rates.
Analysts have been advising Government to pass the savings on so that the working class can have more disposable income. However, there has been no signal, particularly from the Guyana Power and Light (GPL), of moving in this direction. After complaining a number of years that fuel costs have skyrocketed, with consumers being asked to pay a hike in tariffs, it is unlikely any announcements for a reduction will come soon.
Neither has the price for diesel gone down much. Diesel is one of the biggest expenses for miners who have been calling for relief after gold on the world market plummeted.
Miners purchasing a barrel of diesel and paying $42,000 before the price drop will now pay around $37,000. And this is only because Government this week agreed to drop the 35 percent tax on diesel by 10 percent.
At least two big mining companies are reportedly only paying 10 percent tax on imported fuel.
Government has granted the miners association a licence to import fuel, but months later, it is unclear what is happening.
With regards to air fares, the only airline to have done something about the situation has been LIAT, which announced recently that it is removing a fuel surcharge that had been implemented when fuel had reached over US$100 per barrel.
Sol, Regent Street, this week was retailing gas for $219.90 per litre while diesel was going for $217.
At the Rubis station, Providence, gas was $221 while diesel stood at $222 per litre. Cooking gas has remained around $3,700 for one 20-pound cylinder.
The issue of savings being passed on has been heavily debated recently, as oil prices more than halved.
A report in USA Today, on Tuesday, said that airlines including Japan Air Lines and Qatar Airways are planning to remove the surcharge. Fuel surcharges are embedded in the price of a ticket, and are especially hefty for international flights. Some power companies around the world have introduced a fuel surcharge too that is tied to the price of fuel. It is adjusted up and down, depending on the price for oil.
The following is a price breakdown on a major U.S. airline’s round-trip ticket between London and New York in February last year: Base airfare: US$403, Carrier-imposed charges: US$458. The carrier-imposed charges, or fuel surcharge, are higher than the cost of the actual airfare.
With a demand for seats on especially the New York/Guyana route, there is unlikely to be a reduction in ticket prices that will mirror that situation.