As world oil prices plummet

–to stimulate the economy

Pressure is being mounted on the Government to significantly reduce the electricity tariffs and the prices at the pump stations in light of the global trend of prices being extremely low as a result of the drop in oil prices worldwide.

The Private Sector Commission (PSC), in a statement on Monday, expressed concern over the fact that fuel prices and electricity tariffs in Guyana were not reflective of the current world market prices for oil as in other territories.

The Commission also noted that the reductions would provide the much-needed stimulus for the recovery of the sluggish economy, which was still reeling from the effects of the elections-induced slowdown.

The PSC explained that if urgent action was not taken, imports would eventually be drastically cheaper on the local markets and certain local production would diminish while exports would be more expensive.

“… the competitiveness of local manufacturers, farmers and service providers will be lost if urgent action is not taken,” the PSC warned.

It compared the prices at the pump stations in Guyana against those in other countries, concluding that Guyanese were paying almost US$4.50 per gallon of gasoline – almost twice the cost of gas in some developed countries.

Against this backdrop, the PSC called on Government to review the price of fuel, particularly at the State-owned Guyana Oil Company (Guyoil). Additionally, the PSC called on Government to consider a reduction in electricity rates so that the benefits of the lower oil prices can provide some amount of relief to consumers who are suffering as a result of reduced disposable incomes.

Former acting Tourism, Industry and Commerce Minister Irfaan Ali had recommended, at minimum, a reduction of 40 per cent in the price of fuel at the pumps and at least a 30 per cent reduction in the electricity tariffs.

However, Business Minister Dominic Gaskin has justified Government’s non-action towards this global trend, noting that stability was better than short-term benefits.

“I think stability is more important than short-term gains and losses… In other words, rather than us reacting every time there is a drop or rise in fuel prices, I think from a long-term outlook, stability is preferable,” Minister Gaskin stated.

Oil prices have dropped by more than two-thirds on the international market; that equates to billions of dollars in savings for even small countries like Guyana.

Last year’s mid-year economic report shows that Government has been raking in mega-revenues as a result of the falling international oil prices and by not passing on the savings to consumers and businesses.

The report explained that although less fuel was imported, Guyoil made a profit of $1.7 billion as opposed to a loss of $0.9 billion in the comparable half-year of 2014.

This means Guyoil took in $2.6 billion that could have ended up in the pockets of Guyanese vehicle owners. This would have been pumped into the economy in consumer spending, creating a virtuous cycle as a stimulus for other business activities.

Guyana imports approximately 10,000 barrels of oil daily. Today, with prices as low as US$30 per barrel compared to last year when the country was paying over US$100 per barrel, Guyana is saving around US$700,000 (GY$140,000,000) every day.

Last year, Government had announced two separate reductions in the prices for fuel at the Guyoil stations.

Notably, although the Government had made an obligatory gesture towards reducing gasoline prices, as did the previous Administration, the reduction is nowhere near what is happening in other territories across the world.

Gasoline is currently being sold at $190 per litre at Guyoil stations countrywide.