Global oil prices projected to rise this year

Global oil prices projected to rise this year

Price of fuel declines month-over-month


NASSAU, BAHAMAS – With global oil prices creeping upwards since December 2018, there will likely be a knock-on effect on gas and electricity costs in The Bahamas, though the cost at the pump and the price of the utility costs have declined month-over-month.

Brent crude oil, used to price international oils, was at $65.77 per barrel yesterday.

Meanwhile, benchmark U.S. crude oil stood at $56.66 per barrel.

International investment banks benchmark oil prices, averaging around $68-$73 a barrel.

In its March 3 report, Barclays economists projected that brent crude oil could increase to $70 this year as a result of “more critical and bullish determinants of the oil price and oil price volatility in the year ahead”.

In December 2018, brent crude oil stood at $50.77 per barrel.

Last October, the cost of brent crude was peaked at over $86 per barrel.

In its Monthly Economic and Financial Developments (MEFD) report for January, released yesterday, the Central Bank of The Bahamas’ noted that inflation rates quickened for healthcare, transport, but conversely tapered for housing, water, gas and electricity.

“In terms of domestic energy costs, both diesel and gasoline prices fell by 3.0 per cent and 4.1 per cent, month-on-month to $4.55 and $4.73 per gallon during December,” the Central Bank noted.

“However, on a yearly basis, the average cost for both components firmed by 12.3 per cent and 7.0 per cent, respectively.”

With the upward forecast of brent crude oil, it remains to be seen what impact there could be on domestic gas prices and electricity.

The cost of gas at Rubis stations has held at $4.24; Esso station have maintained its fuel at $4.19.

Meanwhile, the price of Shell gas increased in the last week by eight cents to $4.28.

Last month, Bahamas Power and Light (BPL) Chairman Dr. Donovon Moxey said despite the significant fall in global oil prices up to that point, customers should not expect the fuel surcharge on bills to fall anytime soon.

The fuel surcharge is passed directly onto consumers.

BPL has said it capped the charge to 19.15 cents per kilowatt hour to reduce the immediate impact on its customers.

The actual cost was closer to 22 cents.

While speaking to reporters in February on the sidelines of a Rotary Club of Nassau meeting, Moxey said BPL’s regulatory, the Utilities Regulations and Competition Authority (URCA), advised it that the fuel surcharge cost that it absorbed last year had to be passed onto BPL customers.

“We’ve put together basically a process where overtime, as the cost of electricity goes down, we will look to slowly pass those costs — that we ended up financing as BPL — onto the customer,” the chairman said.

“The cost of fuel surcharge will not go above 19.15 cents because it’s no different than essentially anybody financing an additional cost and then doing what’s called cost recovery.”

Fuel surcharge, which typically makes up the majority of electricity costs for consumers, shot up last September as a direct result of the loss of two generators at the Clifton Pier Power Station following three fires at the plant.

As a result, BPL increased its reliance on its Blue Hill Power Station, which operators on more expensive fuel.

Year-on-year (between October 2017 and October 2018) the average bill for residential customers increased by approximately 45 per cent, according to data provided by the power company.

BPL has yet to regain possession of its damaged D-11 and D-12 generators, which remain in the hands of insurers.