NASSAU, BAHAMAS — Fuel prices at the pumps have now dropped under $4 a gallon in New Providence, with industry stakeholders suggesting that prices could potentially drop even further due to COVID-19’s global impact on market ‘supply and demand’.
Valentino Hanna, general manager at Esso distributor Sol Petroleum Bahamas, told Eyewitness News there is no way to predict how long prices will stay low.
“What is happening is purely a function of supply and demand forces at work,” said Hanna.
“The economic activity everywhere has slowed down. There is less demand for oil and products derived from oil and therefore the prices have come down. It’s a natural result of the global economic slowdown.”
“There is no way that we can predict how long prices will stay at this level. As long as countries remain on lockdown the demand will fall and the prices will follow the fall in demand. Potentially you could see prices go down even further than they are today.”
Explaining the structure of fuel prices in the country, Hanna said: “The three wholesalers will bring in the supply at whatever price is available to them by their individual suppliers. The government taxes are then added. Essentially you have $1.15 excise tax charged per gallon on gasoline and diesel.
“On top of that you obviously have Value-Added Tax (VAT). The wholesaler is allowed a $0.33 cents per gallon margin on gasoline and $0.18 cents on diesel. The dealer is then allowed to add his margin on gasoline which is $0.54 cents per gallon and $0.34 cents for diesel. When you add all of those things up that is what you see as the approved maximum pump price at the service station level.”
While the lower prices at the pumps will be welcomed news to most motorists, Bahamas Taxicab Union (BTU) president Wesley Ferguson said it is now of very little benefit to the transportation sector due to the nationwide lockdown.
Ferguson said: “It’s a great thing but for our industry, it has no benefit right now. Who is to say gas prices would have dropped if this Coronavirus situation was not happening.
“Obviously fuel is a big commodity in our industry but taxis are parked right now so we can’t even take advantage of it. I think it will be good for those essential workers especially those involved in the fight against this virus. They will be able to at least get some relief at the pumps.”
Global oil prices have seen the steepest fall in global oil prices since the 1991 Gulf War.
The impact of the global COVID-19 pandemic coupled with a fallout in OPEC negotiations on crude oil output has led to increased output and plummeting oil prices by as much as 30 per cent at one point.
Saudi Arabia, the world’s largest oil producer has made steep cuts to prices per barrel and increased production output in its price war with Russia.
Russia, another oil titan has refused to cooperate with the Saudis’ plan to lower crude production in an attempt to halt the sharp decline in oil prices. Just a few months ago oil was at almost $70 per barrel.
Many analysts believe that the drop in oil prices if sustained will help stimulate the world economy, by giving relief to motorists, airlines and the transportation and logistics industry.
Still, with curfews and restrictions on movement and the operations of many businesses due to the pandemic, the benefits of lower oil prices may never fully materialize.
Yesterday, oil prices started to rebound amid proposals for a meeting with the Organization of the Petroleum Exporting Countries (OPEC) next week, and US President Donald Trump’s claim that a “10-15 million barrel” oil production cut might be on the horizon.