Significant delays in shipping petroleum to the Cayman Islands must be considered when comparing current local retail fuel prices to international benchmark prices, Cayman’s chief petroleum inspector said this week.
Inspector Duke Munroe’s comments come following the revelation of data by his office that showed Grand Cayman’s retail price for regular, unleaded gasoline at the lowest levels it has seen for nearly six years.
Despite similar prices at the pump in February 2010 and this month, the petroleum inspectorate records showed Brent crude – an international benchmark price for petrol – stood at US$73 per gallon in early 2010, compared to about US$32 today.
The inspectorate recorded only a small local price difference between the two periods, about $3.88 per gallon for regular unleaded in February 2010 and about $3.93 this month.
In February 2010, international fuel benchmark prices were “recovering” from a period of lower prices, Mr. Munroe said. Shortly after that date, local prices rose to above the $4 per gallon mark and stayed above that for more than five years.
As of today, world fuel prices are on the decline, but Mr. Munroe said that would take some time for local retail prices to catch up.
“According to the oil companies’ statements in the past, there is a significant lag between crude oil, refined oil and local pump prices,” Mr. Munroe said. “For example, taking the February 2010 [prices] into account, at the point when prices got to just below $4 at the pump … [there] was a corresponding batch of fuel in the oil companies tank which they acquired at say, US$50 per barrel.”
When worldwide fuel prices fall quickly, as they have done so far in 2016, there’s a similar “lag” experienced, he said, just going the other way.
“The decline in price for the year to date has been steep … and such a rapid decline will tend to outstrip reduction in pump prices since consumption seem to follow a relatively constant trend locally,” Mr. Munroe said.
In other words, as long as the higher-priced fuel remains in local storage tanks, consumers will be paying more for it at the pump.
One difference between present day and 2010, is that the petroleum inspectorate now has the ability to obtain the range of pricing information from the local fuel distributors, Sol Petroleum and Rubis, which is legally required to be given periodically. This includes prices at wholesale, refinery and pre-retail operations.
“We made it abundantly clear while formulating the amended legislation, this is information we never had access to so could not verify or validate,” Mr. Munroe said. “We are now in a better position to evaluate from this point.”
The petroleum inspectorate noted it may host “town hall” meetings later in the year, as well as other public outreach efforts to educate the public about the new fuel price reporting legislation.