Gasoline prices down from today

For the second time in a month the government has announced a cut in fuel prices reflecting the behavior of the commodity on the international market.

The new prices start today and will continue until October 22.

The maximum amount that can be charged for a gallon of 91 octane gasoline in the province of Panama is $3.51, the 95 octane will cost $3.76 and the light diesel $3.44.

The intention is that the reductions will be passed to the consumers.

In mid-September the government commissioned a study to find out the way the fuel market behaves in Panama and after the analysis of the multi-discipline team it was found that one of the main factors affecting prices is the volatility of the international market, which is outside the control of the local authorities.

The government also announced the suspension of the $6 million fuel subsidy and proceeded to fix top prices for fuel for the next 14 days to protect the interests of consumers.

The Energy Secretary, Dany Kuzniecky said that the multi-disciplinary team discovered that the values of reference for the prices can be affected by sudden variations in the international markets such as climate conditions (hurricanes), geopolitical events (terrorists attacks or political problems) and the dollar’s devaluation.

He added that by varying the calculation methods, like using an average, plus utilizing an additional source of reference (Rotterdam, USEC) to compare it with the U.S. Gulf Coast and selecting the lower ones the fuel prices can be scaled down.

Kuzniecky added that the Consumer Protection Authority willmakie sure that the fuel distributors and gasoline stations are complying with the new prices. So far it has fined 30 of them for charging more than the maximum price.

The fuel prices in Panama have increased steadily since the beginning of the year, to the point that around June time they were reaching the $5 mark, as a consequence the cost of the basic food basket went through the roof, which caused a great deal of hardship for the common citizen.

Last Tuesday, the oil companies had a meeting with the government to discuss prices in Panama and find a formula that would satisfy both parties.

However there are those who think that the hydrocarbon subject has become a political issue, because many important projects would be sacrificed to subsidize the cost of fuel.

The main problem is that the public transport sector is using the fuel prices as a weapon to attack the government’s plan of replacing the “diablos rojos” for modern buses are creating social chaos.

Harry Quinn, an expert in the subject, said that until the government publishes and explains how it comes up with the prices an element of suspicion will continue to tinge public opinion.

The Energy Secretary attempted to explain how the prices are calculated by saying that there are several elements that have to be taken into account such as the cost of extracting the crude oil, the price of refining it, transporting it to the terminal to be distributed plus the import taxes.

However, people are still confused about what parity means and how it affect prices.

Quinn has been questioning the way the market works and his voice is one of many who do not understand the prices’ behavior.

On Tuesday, a barrel of crude oil was $90.06 in New York, representing an increase of 2.6 percent, which coincided with the weakening of the dollar before the euro and other currencies.

The market is facing a meltdown, the only consolation is that the price of crude oil is under $100, but the problem remains that the distributors and gas stations do not appear to be passing the savings to the consumer.

The fact remains that in comparison with other countries in the region Panama has the lowest prices. A gallon of 95 octane gasoline in Costa Rica costs $5.21 here the price was $4.24 in August 2008.

The government insists that it will find the right formula to control the speculators.