Dear Editor,
Permit me to add a few thoughts to the calls for relief from the GPL and at the gas station. A little context is helpful.
In its June 9, 2013 edition, Stabroek News reported ‘GPL moves to hike rates by 26.7%.’ The company noted that the loss of billions in government subsidy and rising fuel costs were responsible factors. More specifically, the GPL stated that the latter had risen from a weighted average of US$64 per barrel in 2006 to US$108 per barrel in 2012, and that its fuel bill had doubled from US$12.4 billion in 2006 to 24.2 billion in 2012. The facts and figures, as tendered, speak for themselves. The 26.7% was denied. This was in 2013.
On March 1, 2015, GPL rates were reduced by 10%, and prices at the pump went down by 30%. Oil prices around this same time hovered around a high of US$52 per barrel; the 52-week high was US$115 (June 2014) with a low of US$45 (January 2015).
Based on a 6-7 year weighted average price (and the subsidy loss) a rate increase was sought. When oil fell precipitously (> 50%), a reduction came from the GPL. Whether weighted average or moving weighted average was used, clearly tumbling prices were a major contributory factor to the ease for consumers.
Now I submit that, given the reality of another almost 50% fall in oil prices since March 2015 (slightly over a $50 high and a low of just under $30 for the benchmark West Texas Intermediate), that another ease is due, if not overdue, and if only for another 10%. And this would be powered by the same methodologies used by the GPL for the reduction implemented last year. I further submit that the same is due at the pump, and perhaps at the 25% level. There is more that justifies such moves.
First, OPEC has been humbled, if not dismantled. For the near future, it is a spent force. The once omnipotent cartel is now besieged from many points: reduced demand; oversupply; shale oil and fracking technologies; and tar sands. To use the overused: it is petroleum’s perfect storm. As if that is not bad enough, enter Iran! The perfect storm just exceeded itself.
In addition, influential Wall Street analysts are predicting a further drop to as low as US$20 per barrel. As if not to be outdone and left in the cold, the majestic World Bank, through its senior economist, John Baffes, has come forward to pronounce that low oil prices will be around for a long time. Now what is problematic for the Middle East and neighbours could be helpful to the Guyanese public. The paying ones, that is.
They, however, cannot wait for the stalled train of weighted averages. They need succour now at the light switch and in the tank. I say nothing of businesses and growth and the trickle-down effect of lower prices. Let me say this another way: in view of the major presence of oil on income statements, and its free falling prices, oil should not have to drop to zero dollars a barrel for lower costs (GPL, gas, and routine commerce) to take effect, and lower prices to be offered. Maybe even zero dollars a barrel may not have an effect here. Remember the minibus people and the refuge of spare parts?
The price of oil in the last year heavily supports lowering rates in the two places identified. Now, I appreciate that the GPL can neither rely nor operate on speculation and expert opinions on the future direction of oil prices. And further, I doubt whether it was a participant in the oil futures market, given its prior energy attachments. Still, I believe ‒ and strongly so ‒ that the steady decline in oil prices over the last two years (and last year alone) merits a helping hand to the squeezed Guyanese public. The government should do the same with gasoline.
Yours faithfully,
GHK Lall