Diesel, gas prices slashed by 30 percent – govt.

Jan 20, 2015 News

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– excise tax further increased

 

With a constant drop in world market fuel prices over the last few months, Government has decided to reduce the cost of gasoline and diesel at the pump by 30 percent. The change commenced last evening just after Minister of Finance, Ashni Singh announced the price reduction.
This drop in fuel prices attracted however, a 40 per cent increase in the excise tax on gasoline and a 30 per cent hike in the excise tax on diesel.
Consumers purchasing fuel from the state-owned Guyana Oil Company (Guyoil) will see gasoline prices moving from $995 per gallon to $695 per gallon, a $300 reduction. Diesel prices declined from $985 per gallon to $694 per gallon another 30 percent, while kerosene has been reduced from $850 per gallon to $496 per gallon which represents a 42 percent drop.
Minister Singh said that it is expected that by Wednesday, all Guyoil branches will fully implement the new prices. He urged private fuel providers to follow suit in the lowering of fuel prices.
The Minister stated, however, that they have in place a well-functioning mechanism for adjusting excise taxes charged on fuel products. This, he claimed, is to protect the consumer in the event of hiking fuel prices.
He said that under this mechanism, the tax rate is adjusted to an inverse relation to the movement in the world market price of crude oil. This means that the excise tax rate is adjusted downwards by the government when world market prices are moving upwards, and excise tax rates are adjusted upwards when world market prices are moving downwards.
Minister Singh said that the mechanism has been very effective over the years to cushion the price impact of imported fuel on domestic users. He said that between “December 2008 and March 2012, the world market price for crude oil increased by 184 percent, while price for a gallon of gasoline in Guyana only increased by 77 percent.”
During that period, he continued, the tax was reduced from 50 percent to 15 percent, but “as prices started to subside on the world market, the tax rate was adjusted back upwards.” This mechanism has been automatic, the Minister related, and charged that it has been so for the past several years without contention.
Local price has been determined by factors such as the cost, insurance and freight (CIF); determined by the world market price for refined fuel products, which in turn is termed by world market price for crude oil.  The Excise tax charged on fuel landing in Guyana and the profit margin charged by the oil companies and their retailers are also factors, said the Minister.
He advised however, that fuel prices are at their lowest since 2009, almost six years ago.
While excise tax was increased as world market prices dropped, the government further increased this tax given that the acquisition price of the commodity continued to drop. Singh related however, that prices will continue to be adjusted locally depending on the fluctuations on the world market.  Kerosene however will see no tax.
When Minister Singh was asked why the government had not lowered the price of gas given the continued drop in international prices, he explained that oil prices have demonstrated tremendous volatility within recent months and years.
He said that it would be irresponsible to adjust prices at the first sight. “One has to be assured that there is a sustained movement in world market prices before one responds.” To hastily adjust local fuel cost as world prices drop, would increase the volatility of the domestic market, and that is what the government continues to prevent the Finance Minister urged.
The government is hoping however, that other fuel companies, their retail outlets and transportation providers will be carrying on the reduction to the consumer. He said the government does not regulate prices for private operators but opined that competition would play its role in ensuring favourable pricing.
And if this does not occur, the Minister said that he would be unable to guarantee that state gas stations will not get a rush and fuel supply would be in abundance.
The Private Sector Commission in a public statement expressed appreciation for the timely intervention by the government in reducing the price of fuel by almost 30 percent.  The Private Sector Commission said, it had appealed for an adjustment in local prices at the pump as world market prices plunged and is grateful that its appeal was heard.
They said the move will provide a significant boost to industry, especially manufacturers, and comes at a time when the effect of weak commodity prices is impacting the economy. “The Private Sector Commission is hopeful that the reduction in fuel prices will be passed on to the average consumer in the form of lower costs for transportation and other goods and services.”
When Kaieteur News visited the Regent Street gas station about 19:30hours numerous vehicles had already flocked the station. But when questioned, attendants said they were yet to receive word about the fuel reduction.

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