Relation global crude oil trading prices and gasoline prices in Curaçao
Curaçao, 19 December 2014
The Bureau Telecommunication and Post (hereinafter to be referred to as: the Bureau) frequently takes note of the question why the regulated gasoline prices in Curaçao do not follow the global crude oil trading price levels accordingly. The Bureau therefore offers an explanation addressing this matter in this press release.
First of all it is to be stated that any decrease or increase of the crude oil price is not automatically reflected in the gasoline prices. The main reasons for this are explained below.
Prices crude oil:
Crude oil is used as a raw material in the production of a variety of refined fuel products such as gasoline and gas oil. The global market applies a variety of exchange rates for crude oil.
Refined fuel products do have their own rates which are established through supply and demand, which at any given point can differ e.g. for gasoline compared to the supply and demand of crude oil sold per barrel.
On Curaçao the exchange rates of global trading prices for the refined fuel products, as established by Platts, and crude oil (for example WTI exchange rate on www.eia.gov) are monitored.
The Bureau has monitored the price levels of crude oil versus those of refined products since 2008 up to and including 2014.
Price regulation on fuels in Curaçao:
On 19 January 2011 the Council of Ministers approved the “Guidelines for the tariff regulation on fuels” followed by an adaptation on 10 August 2011. Based on these tariff guidelines the Bureau monthly calculates the tariffs of the regulated fuels (Mogas 95, LSD, LPG and fuels for usage by Aqualectra) as sold by Curoil on the local market.
The tariff regulation of fuels in Curaçao is based on the average purchasing price of the fuels as purchased by Curoil in a specific month, increased with the Curoil margin, excise duties, sales tax, dealer margins and surplus/shortage. The calculation of the tariffs includes a delay of 2 months as the average purchasing price is determined on Curoil purchase invoices that become available at a later stage. Due to this administrative delay any possible effects of the oil price on the purchasing prices of fuels are also reflected with delay in the regulated tariffs.
It must be pointed out that a comparison of the current fuel tariffs with those of a few years ago will lead to an erroneous conclusion in view of a series of factors that have changed.
Changes in excise duties, increase in the sales tax and the introduction of a surplus/shortage component influenced the tariffs of the regulated fuels aside from the fluctuations of the purchasing prices of these products. With regard to the surplus/shortage component should be noted that this consists of a recovery and a quarterly correction . The purpose of the recovery is the compensation of Curoil for the shortfall in cost coverage as a result of holding off timely price modifications during the first half of 2011. The quarterly correction makes it possible to continuously correct the applied prognosis in the calculation based on actual figures.
Essentially, the development of the global crude oil trading prices plays a crucial part in the development of the fuel tariffs, but also other factors are relevant. Therefore a direct comparison cannot be drawn.
Deputy Director Bureau Telecommunicatie en Post
Mrs. mr. C.I.M. Sandries