Government could get new powers to control fuel prices and prevent “collusive practices” in the industry under planned new legislation.
A discussion paper on the regulation of fuel markets in the Cayman Islands, released Thursday, suggests a new Office of Competition and Regulation should be given responsibility for policing fuel prices.
“Price controls are a last resort, but the government will do whatever it takes,” said the minister responsible for infrastructure, Kurt Tibbetts, following the publication of the paper.
The proposal follows widespread public unrest last year, culminating in a march on the Legislative Assembly by a handful of the most vocal protesters, concerned that prices at the pump had not declined at the same rate as global oil prices.
The new competition and regulation office will also incorporate the function of the Information and Communications Technology Authority and the Electricity Regulatory Authority, bringing the public sector watchdogs under one umbrella organization.
While the ICTA and ERA functions will remain the same, a new Fuel Markets Bill is planned to create the legal framework for the new office to analyze data and “assess the reasonableness of retail prices.”
Changes to the Dangerous Substances Handling and Storage Law, requiring the industry to provide specific pricing and cost information, have already been introduced.
The new fuel bill will also allow regulators to assess the “state of competition in the fuel markets” and “take such action as is necessary to promote and sustain fair competition,” according to the discussion paper.
It states that government is responding to concerns around the “historical opacity” of the pricing mechanism used by fuel companies.
“The government recognizes that the availability of fuels and in particular petroleum products at reasonable prices is vital to the national economic well-being and general welfare of the islands.
“The object of the legislation is to provide a framework for the management, regulation and supervision of the fuel markets in order to secure optimal prices for consumers while ensuring that market operations [are] consistent with international best practices and standards for safety and environmental protection,” the paper states.
Under the new regime, fuel companies will have to provide the chief petroleum inspector, whose position will move to the new office, with specific pricing and cost information that will enable an assessment of the costs at every stage of the supply chain.
The office will be responsible for setting prices, if such controls are approved by Cabinet, based on its recommendations.
The discussion paper states. “On the issue of price controls, the office will have a duty to advise the Cabinet on matters relating to the state of the market and, should it determine that there is market failure in any market segment, to recommend to Cabinet the action to be taken to protect consumers, which may or may not include price controls.”
There are two “markups” with regard to retail gas and diesel sold at local petroleum stations. The first occurs between the time the petroleum product leaves the supplier’s shores and arrives in Cayman for storage at the Jackson Point fuel terminal; the second markup occurs when the fuel is loaded into the pumps at the gas stations.
Historically, it has been very difficult for the government to obtain that information from local retailers and impossible to get it from the fuel distributors. Mr. Tibbetts said in a Legislative Assembly debate last year that government is left with “the continuing saga of the Petroleum Inspectorate inquiring about prices of fuel and not being able to have any method to verify the information that they receive.”
At that time, he said legislative changes were planned to deal with the issue.
The draft document is posted on the website of the Ministry of Planning, Lands, Agriculture, Housing and Infrastructure at www.plahi.gov.ky. People can submit their views by email to [email protected]