PM adamant LPG prices had to go down… Rubis not very happy

The new prices for Liquefied Petroleum Gas (LPG), which came into effect on Monday, February 16, were arrived at by the Government, based on their research, after Rubis, the main distributor of LPG, failed to provide Government with base information on its product.

Prime Minister Dr Ralph Gonsalves,{{more}} addressing a press conference on February 17, said on Thursday, February 12, civil servants from the ministries of trade and finance, who were meeting with representatives of the fuel distributors, indicated that they were not getting “a clear indication” of what the actual base price was.

“So I made it plain that I am not going to tolerate any further games on this matter. We will set the price and we will set the price on the basis of our own research and what we looked at in other jurisdictions which do not provide subsidies,” he said.

The Prime Minister said he made a decision based on the advice he got, as he was determined that the LPG price should come down.

“I was determined for it to happen.”

Gonsalves said the Government set its base price for LPG, based on the benchmark price which comes from Mont Belvieu. He noted that the prices, which are set for wholesale and retail, follow the maximum benchmark and include all ingredients of cost: base price, transportation and insurance.

The components of LPG are primarily Propane or primarily Butane or a mixture of both. SEARCHLIGHT checked online, and our research indicates that the Mont Belvieu, Texas price of Propane has been falling steadily since September 2014, when it was US$1.05 per gallon. The price as at February 9, 2015, was US$0.56 a gallon. Similarly, Butane, which was US$1.30 a gallon on September 17, 2014, had a Mont Belvieu price of US$0.71 per gallon as at February 18, 2015.

However, the new prices stipulated by the Government are not sitting well with Rubis, who have indicated that they wish to have more discussions on the matter.

In a letter received by the Ministry of Trade on February 17, managing director of Rubis Mauricio Nicholls expressed his concern with the new regulated prices.

“The new regulated wholesale prices approved by your government are significantly below our current acquisition cost and would result in negative margins for us, which we simply cannot accept,” the letter said.

“This is as a result of the fact that since 2011 (the last time LPG prices were changed by your government) our acquisition premiums over OPIS Mt Belvieu have increased dramatically due to new commercial practices adopted by Phoenix Park Gas Processors Limited, the natural supplier of Propane and Butane to the EC markets, including St Vincent and the Grenadines. The alternative of bringing small quantities of LPG into the Eastern Caribbean from the USA Gulf Coast would be even more expensive.”

Nicholls also included in his letter his company’s proposals for the wholesale prices of LPG. It was suggested that a 100 lb cylinder be sold at EC$132, a 25 lb cylinder be sold at EC$35.25 and a 20 lb cylinder be sold at EC$28.25.

While he acknowledged that these recommended prices were significantly higher than the Government’s new prices, Nicholls wrote that they are the minimum prices required to preserve the wholesale margins, in light of the sharp increases in acquisition premiums since 2011.

The maximum wholesale price for a 100 lb cylinder of LPG is now $101.25; that of a 25 lb cylinder was reduced to $27.06 and a 20 lb cylinder to $21.65.

“We respectfully request that you take urgent action to rectify the regulated LPG wholesale prices so that we can remain a viable and vibrant LPG supplier in St Vincent,” the letter said.

Currently, only PetroCaribe and Rubis import LPG into the country. Rubis, formerly Texaco, sells LPG to SOL and to St Vincent Motors, who then distribute to the public.

The Prime Minister indicated that the Minister of Trade and his officials will meet to discuss an appropriate response to Nicholls’ letter.

He also said he will not allow consumers to suffer in respect of price and in respect of security of their supplies. (BK)