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Minister of Energy and Water Resources, Wilfred Abrahams.

Fuel price lag

IN Barbados, there has been a cry for a reduction in the price of fuel to reflect the recent oil prices on the world stage. However, according to Minister of Energy and Water Resources, Wilfred Abrahams, the cost of fuel in Barbados lags the world price due to certain factors.

Speaking to The Barbados Advocate, Abrahams explained that the international price is not necessarily the price at which Barbados purchased oil.

“Because we are such a small purchaser, we have to pay a premium on top of the published oil prices. So when you see it at ‘x’ dollars a barrel, we are buying at that plus a premium, plus some other stuff because of our small volumes,” Abrahams explained.

Referencing whole-saling, Abrahams stated that the more that a country purchased, the better the price that could be negotiated. Outlining additional costs, he said shipping costs for tankers to deliver oil, was not affected by the lower cost of oil and the cost of freight and insurance remained the same. Abrahams also explained the lag in price changes, which are reviewed by the ministry.

“The prices paid by the consumer in Barbados lag the world price due to the time lag between when the product is delivered locally and when the various ministries calculate the price to be paid by the consumer. More frequent reviews will see a more real-time reflection of price paid at the time. You will note that over the past few years, prices have dropped and increased which reflect world market prices, plus all the add-on costs, taxes and other fees which are charged on local fuels.”

The Barbados National Oil Company Limited (BNOCL) negotiates on behalf of the island, negotiating tenders for as much a year’s worth of fuel as explained by CEO James Browne.

“You negotiate for at least a minimum of a year. It is a tendering process. When you buy it, you know what you have for a year – the best price on the international market plus a premium,” said Browne.

Minister Abrahams did say however that there was a possibility that the consumers could see a drop in fuel prices, but it would depend on if the price was lower when BNOCL negotiated.

“The BNOCL is at this time deep into negotiations with suppliers and partners with a view to securing a stable price at a good rate, regardless of price movements. With the uncertainty geopolitically and the COVID-19 restrictions, it’s anticipated that there may continue to be dampened demand. However, there seems to be a global pressure to restart the economies, which will see once again demand for fuels rising. At the moment, we cannot tell which side the coin will land on. What we can keep on doing is constantly monitoring the markets and leveraging our partners, old and new, for best pricing,” the minister said.

Finally, Abrahams reiterated that the goal of the country was to find the best pricing and to strengthen its position as well as to pass these savings on to the suppliers for distribution. (AS)

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