Cayman’s utilities and commodities regulator is seeking a comprehensive review of the local fuel market with an eye toward establishing “effective supervision” of that market.
The announcement made by OfReg Friday came amid a 30-cent rise in petroleum prices over the past three months on Grand Cayman.
The Utility Regulation and Competition Office – known as OfReg – is currently seeking expressions of interest from consultant firms who wish to perform a regulatory evaluation and assessment of the Cayman Islands fuel sector.
The review will seek to “identify existing and potential anticompetitive practices which may impact/impede future competition in existing and potential future fuel markets,” according to the expression of interest document released this month.
OfReg, which also regulates Cayman’s water, electric and telecommunications providers, notes that those industries had preexisting, relatively mature, regulatory structures before the creation of the one-stop-shop regulator. By comparison, the fuel sector was formerly overseen by the Cayman Islands Petroleum Inspectorate, an agency that had no authority to regulate prices.
“[OfReg] is currently in the early stages of establishing a comprehensive regime to effectively supervise the fuel sector, in order to achieve … competition, transparency, efficiency and innovation in the markets …,” according to the expression of interest document.
OfReg President J. Paul Morgan said the regulator has already ruled that Cayman’s major fuel suppliers – Sol Petroleum and Rubis in motor vehicle fuels, and Home Gas in the propane market – maintained “significant market power” under the law.
With that determination made, Mr. Morgan said OfReg can now formulate a set of rules to ensure the market keeps a level playing field. The consultant’s review will assist the agency in determining what further steps, if any, it should take.
Mr. Morgan told members of the Legislative Assembly’s Public Accounts Committee in May that he was generally inclined to let the market sort itself out by encouraging additional competitors, rather than setting up strict pricing rules.
Government intervention in forcing fuel companies, whether in the petroleum market or propane supply business, was envisioned as a “last resort” under the legislation approved by the Progressives-led government last year.
Mr. Morgan told accounts committee members that he believed Cayman could achieve what it wants in “assuring that fuel prices are as low as possible” with the model that is in place now.
Within the past year, smaller competitors have entered both markets, with Refuel getting into the petroleum business and Clean Gas joining Cayman’s propane fuel market, which had been a monopoly for more than 40 years.
In late March, average Cayman fuel prices were around $4.43 per gallon. By June 19, the average among the Rubis and Sol stations on Grand Cayman for the lowest priced unleaded fuel was up to $4.74 per gallon.
Those prices do not include fuel sold in Cayman Brac and Little Cayman, which are much higher.
They also do not include fuel prices at new market competitor Refuel, which is operating in George Town and where prices are much lower.
Refuel prices were $4.29 per gallon for 87 octane fuel and $4.48 per gallon for 90 octane as of June 19, according to OfReg. Most Rubis and Sol stations sell 89 octane and 93 octane petrol.