Crude oil, U.S. retail prices plummet
Bucking a trend of sharply dropping petrol prices worldwide since June, retail prices at Cayman gas stations have remained stubbornly high in recent months, prompting officials with the territory’s oil and gas regulator to raise pricing issues with Cabinet ministers.
However, precisely what the government can do about the local fuel price situation is unclear, since the law gives the Cayman Islands government virtually no ability to influence prices at the pump.
“Cayman operates on the basis of the free market system, so assuming the market forces are at work, current prices are equilibrium prices,” said Chief Petroleum Inspector Duke Munroe. “We, however, do acknowledge that based on the price trend over the last few months, pump prices can be lower than they currently are.”
According to data compiled by the American Automobile Association, the U.S. national average for a gallon of regular unleaded gas sold at retail stations peaked sometime in June at US$3.67 per gallon (CI$3). Since then, the national average price has steadily dipped. As of Thursday, AAA estimated the national average retail price for regular unleaded at US$2.95 per gallon (CI$2.42) – that’s close to a 20 percent nationwide reduction in retail prices within five months.
Cayman’s fuel prices during the same period have done nothing of the sort, according to data maintained by the Cayman Islands Petroleum Inspectorate.
Data on the inspectorate’s website for Oct. 24 – the latest available as of Thursday – put the average price for an imperial gallon (20 percent larger than a standard U.S. gallon) of regular unleaded fuel at CI$5.59 (US$6.82). That average does not factor in prices in Cayman Brac and Little Cayman, which are consistently higher than prices on Grand Cayman.
According to published reports for August 2014, the average price for a gallon of regular unleaded gas on Grand Cayman was CI$5.62 (US$6.85). In mid-September 2014, the average price was CI$5.59 per gallon and in mid-October the average price stood at CI$5.58 per gallon.
AAA averages of national prices in the U.S. during August fell from June’s peak of US$3.67 per gallon to US$3.46 per gallon. In September, regular unleaded was at US$3.39 and in October is was at US$3.17 per gallon. So, while U.S. prices between August and November fell by an average of 51 cents per gallon, Cayman’s prices at the pump during the same period stayed roughly the same, falling by an average of just 3 cents.
Worldwide, the price per barrel of Brent crude oil – typically used as the benchmark for fuel prices – dropped by an even greater percentage than the U.S. retail price average.
A 29 percent drop in prices on Brent crude since June 2014 has been recorded. As of mid-October, the latest figures available, price per barrel was US$82.60, the lowest level seen in nearly four years. That’s down from June’s high of US$115.71 per barrel.
In some jurisdictions, price per barrel of Brent crude had dropped even further. In west Texas, USA, prices went below US$80 per barrel for Brent crude in late October.
Local petrol station owners in Cayman said Thursday that they had noted the change in U.S. and worldwide pump prices, but indicated the situation in Cayman had not changed since August.
“We’ve been wondering the same thing [about the price drop],” said Walkers Road Rubis station co-manager David Wight. “We can only wait until our prices are dropped [by the distributors]. When [prices] are reduced to us or go up to us, we’ll do the same.”
MacGregor Yates, owner of Four Winds Esso in West Bay, said he also hasn’t noticed any price difference from the distributors. “I bought gas on Tuesday and the price is the same,” Mr. Yates said. “The prices haven’t changed for me since August.”
Maedac Rubis station operations director Morgan DaCosta said his staff actually spoke with Rubis corporate managers in Cayman a week ago about the petrol prices not dropping.
“We were told that they don’t have any kind of contracts anywhere,” Mr. DaCosta said. “They had to buy loads [of fuel] at any price they can find.”
So, if the petroleum distributor bought a load two months ago, it would have to be sold to retailers at the price it was purchased – which in August or September – would have been a much higher price. Still, Mr. DaCosta said, there hasn’t been any price change from the oil companies since July and he would expect prices to go down eventually. “There is usually some lag [between Cayman and U.S. prices], but it’s not three months behind.”
Mr. Munroe agreed with that statement: “Movement of prices locally are subject to the lag effect, albeit it seemed a bit more drawn out in this case.”
The government in 2008 considered the idea of implementing local price controls, but dropped it after warnings that “market distortions” might affect fuel supply to the Cayman Islands.