THERE IS no good reason, except one, why Barbadian consumers do not know what the imported prices of oil and gasoline are whenever these commodities are brought into the country. This lack of information is at the heart of widespread ignorance that is generally allowed to confuse the public on what matters most – genuine analysis of the issues affecting our daily lives.
Since last year, the international price of oil has been declining with significant benefit to the country. This has been acknowledged in the reporting of a more than $300 million reduction in the oil import bill over the course of a year. Thankfully the trend continues to be downward over the last two quarters of 2015. In essence, the country is using less foreign exchange to import oil.
In the circumstances, there has been a boast that the foreign reserves have stabilised. The suggestion is that the stability resulted from the deliberate policy of the Government to dampen spending. The deliberate policy is of course excessive taxation. This policy continues to be abused and misused and has contributed mainly to the lack of economic growth over the last seven years.
This is part of the widespread ignorance caused by lack of information that is being used to confuse the public. In a year when tourist arrivals have increased and the oil import bill is much reduced, the foreign reserves at the Central Bank still declined, yet the impression is being given that they have stabilised because of the Government’s policy of excessive taxation. It is unfortunate but true.
Two sets of mark-ups
What is equally unfortunate is that Barbadian consumers have not benefited sufficiently or significantly from the reduction in international oil prices. To truly appreciate this observation, the public ought to know the imported prices of oil and gasoline from the source. What is known by the public is an ex-terminal price that is not the imported price.
The final price of gasoline to the consumer is made of an excise tax that does not vary with the imported price. There are two sets of markups at the retail and distribution stages that are also fixed regardless of the price. There is a VAT that has a fixed rate but the dollar impact varies with the ex-terminal price and the effects of the impositions mentioned above.
In the absence of imported prices for oil and gasoline, the argument that Barbadian consumers have not benefited sufficiently and significantly may be pursued by looking at what has happened to American consumers. Information on the impact on the latter is more than available and in the limited space cannot be adequately presented.
First the price of gasoline in the United States varies in the same state and across states because of competition. The same is not true in Barbados since there is only one price and this is understandable given the market structure and the size. Furthermore, the Government is the importer of oil and gasoline through an entity that it owns.
Suffice it to say that it takes about three times more, using Barbados dollars, to buy a tank of gasoline in Barbados relative to the US. The difference is largely the effect of taxation on the local product. There is also the belief that the importer is making excessive profit especially in times of declining imported prices.
Excessive profits
However, information is now available to verify that the importer is making excessive profits. It will also verify that Opposition Leader Mia Mottley was correct all along in suggesting that an unnecessary burden was being inflicted on Barbadian consumers. In short, the information will reveal quite a lot about what the importer has been doing. This information becomes extremely relevant and timely given that there is the pending privatisation of part of the operations of the importer.
It was fascinating to hear recently from the Minister of Finance, Christopher Sinckler, that the pending privatisation was far advanced. For one, this cannot be the same Government that vehemently denied privatization of any state assets prior to the 2013 general election.
Two, this cannot be the same Government that is “jukking out” taxpayers’ eyes on the one hand and refusing to adequately pass on the benefits of reduced imported prices of oil and gasoline on the other hand.
In the face of declining oil prices, an alternative energy programme is put under severe stress and so the search for a political legacy becomes harder. Pick sense from nonsense and understand the difference between dollars and cents.
Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email:[email protected]
