Barbadians Breathe Sigh Of Relief As World Oil Prices Fall; but Why Is The Gas At The Pump Not Falling?

With oil prices recently declining below the $110 level, it is not all that surprising to find that gasoline prices are following suit. Over the past two months, the average US price for a gallon of unleaded has declined over 40 cents per gallon. While this is welcome news, gasoline prices are still higher in inflation-adjusted terms than at any point prior to 2008 - Source - U.S. Energy Information Administration

With oil prices recently declining below the $110 level, it is not all that surprising to find that gasoline prices are following suit. Over the past two months, the average US price for a gallon of unleaded has declined over 40 cents per gallon. While this is welcome news, gasoline prices are still higher in inflation-adjusted terms than at any point prior to 2008 - Source - U.S. Energy Information Administration

Barbadians have started to breathe a deep sigh of relief at the news that world oil prices have tumbled from the $150.00 per barrel to $100.00 in recent days. Several reasons have been given by the market analysts but at the top of the list is a weakened demand caused by slowing down in global economies. Whatever the reasons are the Thompson government would be urging the agency responsible for importing oil into Barbados to button as many future contracts as resources would allow. The objective would be to create a buffer to the external shocks created by volatile oil prices. This would have the affect of giving the government time to do its work.

The last eight months has been a rough initiation!

The Thompson government should not celebrate too quickly because there is news surfacing that OPEC, the oil cartel responsible for producing 40% of the world’s oil maybe about to make a decision to cut back production to stop the price of a barrel of oil falling below $100.00. This comes against the background of oil producing countries and the oil refiners having earned billions of dollars in recent months. The greed is enough to make anybody sick.

Lord come for your world!

The Thompson government has been saying the right things about the need to create a viable energy policy, so far we have not had the feeling based on what we have seen that any major initiative is underway. BU appreciates that there is enormous research required to support  a decision to wean Barbados away from the tentacles of fossil fuels and the several interest groups that feed from it. But doesn’t commonsense dictate that we must and soon?

While Barbadians revert to old lifestyles caused by falling oil prices, some of us will continue to offer our concerns about the reluctance of Barbados to fully engage a renewable energy policy. Having said that we find the following article which appeared in the London mail very interesting.

Has the mechanism to show how gas prices in Barbados are determined been published? What of the new policy which was announced in the last Thompson budget?

“The prices of petroleum products, LPG and natural gas will now be set by the Ministry of Trade without intervention by Cabinet on the basis of a formula approved by Cabinet and applied to the current import market prices with effect from August 2008.”

Did we miss the announcement?

which has promised to roll-out a new policy which would see movement in gas prices being passed on to the pump in real time. i.e. the government will be subsidizing gas at the pump any longer.

21 comments

  • Pingback: Global Voices Online » Barbados: Oil Prices

  • From Peak Oil author and commentator James Kunstler’s latest blog entry:

    Last Ditch

    Why do the big deals always happen over the weekends? So the big boyz in government and finance can take off their neckties when they bargain with each other? So the markets will be closed and unable to register a response one way or another? So the shrinking fraction of the US public that pays attention to anything besides Nascar and pornography won’t catch the news Saturday evening?

    This weekend’s big deal was the US government taking over the “government sponsored enterprises” (GSEs) Fannie Mae and Freddie Mac that guarantee trillions of dollars in mortgages. The “guarantee” is supposedly accomplished by converting bundles of mortgages from the banks and loan companies that originate them (that make the contracts with the buyers of houses) into bonds that can be sold downstream. Risk was theoretically dispersed among the holders of these bonds. This all seemed to work during the long stable period when our cheap oil economy was chugging along, and house prices maintained a consistent relationship with incomes, and people paid their mortgages dependably. The whole system ran like a reliable machine — like a Chrysler slant-six engine!

    Until the cheap oil age came to an end. Then, all parts of the system shook apart. It was the end of cheap oil that catalyzed the housing collapse and, by extension, the current huge financial crisis. But the run up to it was like a bounce off a high diving board into an empty pool. The bounce came around 2001 when it became apparent that the US standard-of-living could not be maintained on incomes in a post-cheap-oil economy. The trauma of 9/11 prompted a new and utterly insane consensus to form that the US standard of living could be switched over from income to massive debt. All the normal brakes against irresponsible lending and borrowing came off — embodied in Alan Greenspan’s absurd statement that it was a good time to assume an adjustable rate mortgage when interest rates were at a historic low — meaning they could only be adjusted upwards. Why hold Greenspan responsible? Because he was at the apex of the authority vested with establishing norms, and he shoved our behavior into the realm of the recklessly abnormal, and he should have known better.

    The public went along with it because “free money” and high living are fun. Their behavior was reinforced by other authorities — for instance, President Bush, who told Americans to go shopping after the 9/11 attacks. (They went shopping with credit cards.) Things really wobbled in 2005 — which was, coincidentally, the year of all-time world-wide peak conventional oil production — with hurricanes Katrina and Rita ripping through the Gulf of Mexico oil rigs as a dramatic highlight. (It was also the year that The Long Emergency was published.)

    Since then, the US economy and the financial part of it that became a nine hundred pound tail wagging a thirty-pound dog, has been held together with baling wire, duct tape, and band-aids. All the debt run up by all parties — home-owners, credit-card holders, business, banks, hedge funds, government — is not being paid back reliably, and all the leveraged arrangements that depend on it being paid back are coming apart. Thus, capital disappears. The wealth of a nation disappears. All that remains is the pretense that we are still a wealthy society.

    Continued at:
    http://jameshowardkunstler.typepad.com/clusterfuck_nation/2008/09/last-ditch.html

    Now go read this:

    Like

  • With the last administration, the prices at the pump fluctuated according to the price of crude oil. This administration jumped prices at the pump to a astronomical height when the price of crude oil was much higher than it is now. MR. P.M don’t you think it’s time for a reduction in gas at the pump or once increased you don’t plan to decrease. Plus LPG prices were to be linked to the crude oil price, does that mean a reduction in the cost of LPG now?

    Like

  • This government wants to pay all its local loans (as per the IMF advice) in as short a period as possible.

    Hence the high taxes and fuel costs. Which is detrimental to this struggling economy and the people of Barbados.

    Like

  • iWatching ya
    We all know what the IMF gives. If we followed the IMF advice half of the civil servants would be home and the other half on reduced pay. We would be struggling like Jamaica, guyana and the other countries that are under the IMF grip for many years. WE have to think for ourselves. One thing I must say about the former P.M that many times he went against the IMF advice and they themselves admitted that he was doing a good job. It would please the IMf to see bajan families lose the houses they now have because it is rumoured that they are envious of the standard of living in this country.

    Like

  • Rememebr this extract from the July 7th budget

    “The price of petroleum products and LPG will be adjusted monthly by the Ministry of Trade on the advice of the Division of Energy based on the prices paid for these products by the importers and in accordance with the formula that has been approved by the Cabinet. The only change that the Cabinet has made to the formula for the pricing of these products since the prices were last changed is that the component included for the recovery by Barbados National Oil Company Ltd has been increased to cover losses sustained by BNOCL when local prices did not increase, even though import prices had risen sharply. The prices of petroleum products, LPG and natural gas will now be set by the Ministry of Trade without intervention by Cabinet on the basis of a formula approved by Cabinet and applied to the current import market prices with effect from August 2008.”

    Like

  • Remember this extract from the July 7th budget

    “The price of petroleum products and LPG will be adjusted monthly by the Ministry of Trade on the advice of the Division of Energy based on the prices paid for these products by the importers and in accordance with the formula that has been approved by the Cabinet. The only change that the Cabinet has made to the formula for the pricing of these products since the prices were last changed is that the component included for the recovery by Barbados National Oil Company Ltd has been increased to cover losses sustained by BNOCL when local prices did not increase, even though import prices had risen sharply. The prices of petroleum products, LPG and natural gas will now be set by the Ministry of Trade without intervention by Cabinet on the basis of a formula approved by Cabinet and applied to the current import market prices with effect from August 2008.”

    Like

  • One problem the government needs to stay away from is to formulate policies which are not effectively rolled-out. For example several concessions were given to the agricultural sector under the last government but the stakeholders could not access because the vehicles were not put in place to deliver.

    Like

  • …..I did not hear any complaints last year when the last government artificially kept gas prices low for months when the price was rising all over the world.

    Did BNOC not accumulate a bill said to be near $80M?

    Who do you all think is going to pay off that debt?

    In any case, how will it be helpful to lower gas prices in an environment where we all know that our future is destined to be one oh high fuel prices and reducing supplies?

    It is far better to begin to adjust at a stage where we have options (as appears to be the case now), than wait until we are boxed in with the reality of high prices and scarcity.

    ….take it easy scout. You have to pay back for your Christmas gift last year….

    Like

  • Bush Tea
    It seems that we’re paying back for voting this government into office.

    Like

  • I don’t see it that way Scoutie,

    I think that we are paying back for the splurging that we did when the BLP failed to adjust fuel prices upwards before elections- so as not to upset us.
    …no matter who won elections we would have had to pay back sometime.

    …there is no free lunch.

    Like

  • @ Mr. Bust tea

    We agree with you that it makes since to adjust now but the fact that Barbadians are asking about why the price is not coming down suggest we are dealing with expectations. Barbadians have been told by the Thompson government that a mechanism will be put in place to pass on oil increases as they occur and remove the previous subsidy.

    The government will have to come to the people and tell them what the plan is to shape expectations. Your argument does not mesh with the policy of the government Bt.

    Like

  • Pingback: Global Voices em Português » Barbados: Preço do Petróleo

  • Bill O’reilly said all along that it was speculators and an unregulated oil industry that was to blame for the high oil prices.

    The oil industry overdid it, people parked their SUV’s, became very conscious of their energy use and demand for oil dipped, prices dropped.

    The power of the people again.

    Like

  • I always thought with the rise of the current US dollar & lower World market prices for oil that it would also be reflective in Barbados,but I guess I was wrong.

    OPEC has also decided it will cut oil output by ~500,000 barrels a day which could mean even higher prices in Barbados.

    I wonder what the DLP government’s plan toward these problems & what is the progress of the oil exploration off Barbados’ coast ?

    Like

  • Bush tea wrote

    “Did BNOC not accumulate a bill said to be near $80M?”

    Now here is my question:

    To whom is this $80M owed?

    Like

  • @The Devil

    If we take your argument to the economic conclusion…lol, we know that the taxpayers are ultimately responsible for the debt but the question is should this be managed at the macro level of should individual Barbadians carry the brunt of increases as they occur. The BLP says no the DLP says yes a clash of philosophies. The DLP appear to be using this mechanism to reengineer behaviour i.e.demand for fossil based products.

    Which argument are you using The Devil?

    Like

  • On a daily basis now, more and more people are frantically coming and telling the PDC about the hardships and miseries that they are experiencing at this time of so-called economic decline in the country. Whether nationals or non-nationals, males or females, young or midle aged, many of these persons are bombarding us with personal information about how their construction businesses are being adversely affected by these times, with their trucks, backhoes, bobcats and other equipment being made to lay idle, and too some other persons are hollering out loudly how their livestock businesses are being severely hampered by high feed “prices”. As well, many workers are telling us – and with a deep sense of despair in their voices too – that they have recently been laid off from their work, esp in the construction and tourism sectors of the country, and some small store owners are angrily telling us how they have had to shut shop in rental spaces in Bridgetown, with rent increasing alarmingly. And, most of all, all of these same persons have been bitterly complaining to us about the still staggeringly high cost of living and the still distressingly prohibitive cost of doing business in the country, even when at this juncture their personal and/or business INCOMES are still HARDLY or ARE NOT EVER increasing proportionate to the annual increases in the cost of living and doing business in the country.

    So, therefore, it was NOT any surprise to us when – in her July 25 press briefing on the performance of the “Barbados economy” for the first half of the year 2008 – the Governor of the Central Bank of Barbados, Dr. Marion Williams, reported that growth for the first half of the year 2008 was a meagre 1.4 per cent – which was significantly below the average rate of growth for the corresponding period for the last five years ( Barbados Business Authority, Monday, August 4, 2008). Talk about the so-called Barbados economy being in a tail spin!!

    Also, it did NOT surprise us either when – in presenting his 2008 Financial Statement and Budgetary Proposals in the House Assembly on July 7, 2008 – the Prime Minister, Mr. David Thompson, announced that growth for the first half of the year 2008, was a miserly 1.8 per cent and that a so-called economic slow down was being projected for the first two quarters of 2009 ( The Daily Nation, Tuesday, July 8, 2008).

    However, where there has, since Jan 15 2008, been gross and reckless mismanagement of the Barbados economy – and in the face of serious internal and external shocks to it – is where the said Mr. Thompson would have unwisely proceeded in the said Financial Statement and Budgetary Propasals to carry out further TAXATION ASSAULTS on primarily the backs of the masses and middle classes of people of Barbados , and which, on top of those murderous increases in domestic fuel costs in April by the Prime Minister, are surely bound to help bring about further deflationary depressing social material conditions to the country, and to the vulnerable, the poor, the needy, and the elderly within it.

    Moreover, it would really be a sick joke for anyone in Barbados to say to others that – because world oil “prices” would have been falling to some degree for two months or so – this would automatically mean translation ultimately into economic stabilization and recovery for Barbados, when it is so clear that – whereas the relevant speculators and others would for a reasonably long time – but only up to about 8 weeks ago – have been conveniently using traded oil as a highly valued financial hedge against the falling US Dollar, et al, it is now however being seen that the lower and lower the “prices” of global oil go they are indications of deepening material recession in many parts of the global economy – NOT the bottoming and then sailing out of this economic financial crisis for many, many countries of this globe. Hence, it is these declines in global demand and supply structures across the relevant world commodities and services markets – and NOT falling world oil “prices” – that are bound to reach a point whereby they will have greater adverse effects on social, material and financial conditions in Barbados.

    So, instead of the Prime Minister helping to create innovative bulwarks against these kinds of external shocks, he, by way of increasing domestic fuel costs and increasing TAXATION burdens on the backs of the masses and middle classes of people in Barbados, is NOT ONLY exposing Barbados and people in Barbados to greater internal and external shocks BUT ALSO he is grossly and recklesly failing in his duty to protect Barbados and people in Barbados from those said internal and external shocks. Shame on you, Mr. Thompson and the DLP!! And greater shame on former prime minister, Mr. Arthur, and the former BLP Government for helping to put Barbados in this kind of ignoble siuation!!

    Finally, to end off where we started, these persons that we have come and are still coming in contact with do clearly exhibit a sense of feeling cheated and let down by BLP and DLP Governments over the years, with none of these old parties looking after their interests, even in cases whereby they would have been promises made to such persons by members of these two older wretched parties. To them and to the vast majority of voters in Barbados we in PDC say IT IS TIME TO STOP ELECTING DLP and BLP Governments in this country, and to START ELECTING A PDC Government for a brighter and better Barbados, and for a more wholistic personal and business development of your and our selves.

    PDC

    Like

  • David

    you have gone a bit ahead of me (but only a bit). I want to know ;

    Do we (taxpayers, the Gov’t) owe Shell, Exxon, SOL, Saudi Arabia, or Trinidad $80m?

    OR

    Did Gov’t make up a difference of $80m between what citizens paid at the pump and what the fuel actually cost?

    OR

    Was it that $80 m of taxes normally due to the treasury were not collected?

    OR ??

    Like

  • The Devil
    At the end of the day my government promised to adjust the gas price in accordance of the crude oil prices. We all got scared because we expected the crude oil price to reach US $ 200.00 per barrel and we were willing to bite the bullet. However, the price has fallen drastically, therefore it follows that the gas prices should fall also. MY government told me so. I’m calling on the government to at lease, live up to one (1) of their promises.

    Like

  • Hi everyone have been totally out of the loop due to work, but I just want to say that I agree totally with Bush Tea, at the end of the day we have to repay the debt created by splurging in the past. One of the social issues with energy is that when people are actually held accountable for their consumption there is a serious tendency to consume less, which by any means we have to start practicing from now. As for the monthly adjustment of fuel prices, I think in essence it was a good plan but it is destined to fail on a governmental level unless new people are brought in to do specifically just that, it will be a lag and drag situation like with most new legislation since no one wants extra work on their plate (especially not on a monthly basis) at least unless there is significant increase in pay, doing the research and calculation for that ajustment is not a huge task but I don’t believe it is a small one either.

    I think we will see a small drop in gas prices in a few months, but it will inevitably rise again so I believe it is time for us to all practice conservation and look for methods to squeeze every Joule of energy from every drop of gas we consume.

    Like

Join in the discussion, you never know how expressing your view may make a difference.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s