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Preville Offers To Help Review Govt’s Fuel Policy – Points To Flaws In Current Price-fixing

ECONOMIST Dr. Claudius Preville
ECONOMIST Dr. Claudius Preville

ECONOMIST Dr. Claudius Preville has added his voice to the debate about fuel prices in the country and has called on the government of Prime Minister Kenny Anthony to urgently view its policy in computing rates so that Saint Lucians can earn more benefits.

What’s more Preville, a member of the opposition United Workers Party, has offered his services to the government to help it undertake that review.

Preville said the problem was fundamentally the period of time that government was using as the basis for its “proxy” CIF price, i.e. twelve weeks over which there is likely to be considerable variation in fuel prices and hence an average will not do proper justice to real developments in world markets.

He said: “The policy of government with regards to fuel prices does not help the people of St. Lucia and the economy as it currently stands. There are several problems with the policy.”

Firstly, Preville said, it was creating artificially high prices for fuel causing Saint Lucians to channel significant amounts of cash into a resource that could have been utilized to finance other operations.

Secondly, it was causing the cost of production of all goods and most services in the economy to be higher than necessary. This in turn was causing reduction in competitiveness of Saint Lucian produced goods.

Thirdly, it was effectively creating a stranglehold on the economy by depriving citizens of the opportunity for economic growth in other sectors that could be fuelled by savings in the fuel cost.

Preville said it was important to first understand what an average was. He explained: “Average, as used by government is the mean of several numbers. It is arrived at by adding several numbers then doing a simple division by the number of numbers added. This kind of average is only good when the various numbers being considered are reasonably similar in magnitude.

“However, when there has been considerable variation in the magnitude of the numbers then an average can be deceptive. To put this in context, it is possible for a man six feet tall to drown in a swimming pool of average depth two feet.

“The reason is that while average paints one picture of the pool depth, it does not tell us that there might be sectors of the pool that are significantly deeper than others. The fuel pass through mechanism is only useful if we are averaging prices over an interval in which there has not been too much variation.

“So for instance, we expect prices to be relatively stable over a short interval like one week or perhaps a few weeks. But from experience and for a variety of reasons, prices are never stable over a long interval of many weeks.

“Therefore, in order that the benefits of lower oil prices in the international markets reach the people of Saint Lucia in a timely manner government has to reduce the time interval over which the average is calculated to come up with a proxy CIF price”.

Preville noted that there were two petroleum importers in St Lucia: Rubis and Sol. Each importer uses its contacts to source fuel on the world market and pays a certain price. Government sets its proxy CIF price based on a historical twelve week period and importers are forced to use that price until the twelve week period concludes.

At the end of the twelve week period if the actual CIF price paid by importers was lower than the government set proxy CIF price, then the importers have to remit the difference to government. If the government set proxy CIF is below the price set by importers then government has to remit the difference to importers.

Said Preville: “The problem is that when the government set Proxy CIF is too high the savings that should be going to producers and consumers are appropriated by importers for three months. Hence, importers have three months to invest the surplus revenue as they wish and only after the three months are up, they remit the principal amount to government.

“In the scheme of things we are looking at more than $10 million being misallocated as a result of the current policy. According to my own research we import approximately 1.9 million gallons of gasolene and diesel per month.

“With the government set proxy CIF at $8.66, given that importers can source fuel for a price in the range of $6 to $7 per gallon the deadweight loss to the economy is approximately $3.5 to $4 million per month.

“Now let us put this in context. Take a minibus driver who consumes 15 gallons per day to fill up. If the price is properly aligned to world prices he can save about $30- $40 per day on fuel alone. This translates to greater ability to buy food and clothing for his children, pay for their education and his utility bills. The same applies for a fisherman or farmer.

“Confidential data received from one importer shows an import price in December 2014 of $6.50 per gallon. Government has recently set its proxy CIF price at $8.66 per gallon. If we used the December price at $6.50 per gallon the price of a gallon of unleaded fuel in January should have been $11.81”.

Preville noted that currently, the retail prices for unleaded fuel in some neighbouring countries were as follows: Dominica $11.42, Grenada $12.63; St. Kitts $10.75; St. Vincent $12.72; and Saint Lucia $13.65. “But given Saint Lucia’s larger economic size and consumption of fuel it follows that the least cost of fuel should be in Saint Lucia and not any of these other islands”, he said adding:

“This policy is clearly doing significant injury to the people of Saint Lucia and there is no logical reason why it should be continued for twelve weeks. I call upon the Prime Minister to urgently review the policy in place so that ordinary Saint Lucians will benefit from lower fuel prices to the extent that we should. Since this is an issue of national interest, I would be happy to avail my services to the government if needed”.

8 Comments

  1. Preville, I must confess your solicitation to render help is disturbing. It reminds me of Stephenson King’s attempt to render help to the many victims of the Christmas-eve rain storms, for which King was punished and humiliated by this paranoid schizophrenic Allen Chastanet.

    Allen punished King for not using the plight of the dead and victims of the trough to win the next elections. Has Allen Chastanet undergone some kind of metamorphosis from being a lowlife imposter to some magnanimous saint. This must have happened last night, since a few days ago we found Allen being excoriated by Jaida JnPierre. I will include the visual at the end of this statement.

    After being rejected and humiliated by Allen and his cabal of Negroes, why would Allen permit you to Help the Government of St. Lucia ?? What nefarious scheme have you been delegated to perform by your leader, to accomplish his goal of installing a Ms Daisy to be the role model for our beautiful Nappy-hair Black Girls ??

    Look, Preville ! if you are desirous of being helpful to Lucians, stop being a Negro slave for your Slave Master Allen Chastanet by trying to make him win the next elections on the backs of house niggers like Claudius and Gale.

    To perform ‘Jean-Garjey’ Black magic, Jaida JnPierre skins Allen Chastanet in this Clip before he ‘dey-garjeyed’.

    (a) https://www.facebook.com/video.php?v=352125341658209&set=vb.284538805083530&type=2&theater

    (b) https://www.youtube.com/watch?v=CkYrceU8EJM

    .

    1. One most certainly cannot fix — except by happenstance and perhaps by serendipity — what most clearly, one does NOT at all understand.

      For all its pimples, warts and all, Dr. Preville has YET to explain to the general public the nitty-gritty of pricing mechanism being used CURRENTLY IN SAINT LUCIA! Nor has the GOSL. Strange as this may seem.

      Few of us know that, for example, a similar system does exist in BARBADOS, where too, the consumers are quite upset over the very same issue of not seeing a sizeable price reduction that reflects the current state of a near 50% decline in the world price of oil.

      For starters, the domestic price of oil is NOT calculated on the world price of oil. Therefore, we are looking in the wrong direction for an explanation of our domestic pricing woes.

      Next, the inclusion of a new oil supplier means that any contracted price for future delivery will be a critical factor in the determination of domestic prices. Can we unilaterally change our suppliers?

      Additionally, whatever the difference that government collects through the stated price, by way of the mechanism when the supplied price goes down, is supposed to be balanced by the loss in government revenue to reflect something close to the real CIF (cost, insurance and freight) landed value of the fuel.

      The mechanism is supposedly designed to present more or less, an even or more consistent price over a long time period, to enable businesses and consumers to plan and budget for the expense. Without this mechanism in place, the domestic economy would be facing and be buffeted by (like other countries operating with the pure market forces) the real changes in price by the market forces of world supply supply and demand.

      Another issue: Little has been revealed regarding the environmental issue of keeping the relative prices for gasoline and diesel the same or constant, to deter fuel-switching to the more environmentally destructive diesel fuel. Nobody has explained anything about the pricing calculations associated with the BTUs involved with the fossil fuels. Perhaps too, this does not enter into the calculus of the pricing mechanism. But if it doesn’t, this nonetheless explains the superficiality that goes undetected in level of political mischief being harvested and created by the uneducated pontificating about what they do not yet understand.

      Therefore, one can safely say that up to now, there is a great deal of rhetoric emerging from all sides on this matter: neither the government, nor the UWP has explained to the listening public the mechanics of what actually and what exactly is taking place in arriving at the price of fuels in Saint Lucia. Inquiring minds want to know.

      We have had more heat that light (enlightenment).

      1. XL:

        You introduce an interesting angle to be considered, that of environmental impact of fossil fuels/Gasoline, diesel. I don’t know the details of what is involved in the acquisition of what we call Oil when we refer to the products from Refining the Hydrocarbon.

        However It is important to understand that when we are told that the purchase price of “OIL” has decreased by 50 %, this does not mean the price of a refined product has also decreased by 50%. When the price of Crude Oil, as the unrefined Hydrocarbon is known, drops from 100 to 50 dollars per barrel/31.5 gallons, that Crude hydrocarbon has to be Refined/processed to produce gasoline.

        The Crude oil has to be fractionated, a process where the hydrocarbon chain molecules are broken through thermal vibration to produce Liquified Petroleum Gas(LPG) from the smaller molecules which is a volatile gas compressed into a liquid.

        The next product from fractionation is called Naphtha, consisting of a longer hydrocarbon chain molecule. The lightest in this chain is Methane, consisting of one Carbon atom and four hydrogen atoms and the heaviest we call Pitch.

        Below the Naphtha we have hydrocarbons in the Kerosene range, followed by heavier molecules in the Diesel/fuel-oil range and so on.

        The Naphtha undergoes further processing where sulfur is removed known as desulfurization, and an exothermic reaction called Hydrogenation to form a more complex hydrocarbon molecule. Aromatic hydrocarbons, Benzene, Toluene, Xylene are all derivatives of the Naphtha used as solvents in paints and industries.

        I have mentioned these processes to show that the cost of producing gasoline from Crude oil plays a significant part in the price of motor fuels. Allen Chastanet wants to deceive people into thinking that if the price of Crude drops by 50 %, then the price of Diesel should have a parallel decline.

        Allen Chastanet is a train-wreck waiting to happen on Bridge Street; he is an ignorant imbecile who has been placed in the leadership of UWP as a PM without ever being elected to Parliament by anyone. He is the Joker on a mission to reduce the Pitons to ashes, and sink Rat Island below the Caribbean Sea.

        1. I think Allen Chastanet wants to remind St.Lucians that as a former Leader of the Opposition Kenny Anthony said that it was extortion for the UWP Government to charge $12.75 for a gallon of gasolene. At the time the world price of a barrel of oil was US$147.00. Today the price of petroleum has dropped to about US$47 a gallon; yet, Saint Lucians pay $13.75 per gallon for gas.

          Now, what part of the above is untrue? I guess a racist cannot accept the truth (coming from a white person) even when it jumps up and smack him between the eyes.

  2. Claudius:

    When did you receive Allen Chastanet’s permission to “HELP” the SLP government of St. Lucia ? I distinctly recall the punishment and humiliation incurred by Stephenson King, when he made an honest attempt at “HELPING” the SLP Government after the country had suffered the catastrophic rain storms of the Christmas eve of 2013.

    The paranoid schizophrenic Allen perceived King’s attempt to help the families of the dead and the thousands of victims as a challenge to his dictatorial station, and King was publicly humiliated and punished mercilessly, resulting in his demotion and being evicted from his office by Gale Rigobert throwing the personal belongings of his employees in the Castries River.

    What has happened since this despicable behavior by your Slave Master Allen, that he would now permit you to “HELP” without an ulterior motive ? Need I remind you, that at the time of the Rain storms’ disasters King was punished by Commandant Allen for not using the cadavers laying about the country as an opportunity to “WIN THE NEXT ELECTIONS”

    So I will ask you, what transubstantiation has taken place in changing this vindictive devil Allen into the Son of God, Savior of Kenny Anthony’s St. Lucia ? Did Chastanet permit you to “HELP”, or have you embarked on his diabolical kamikaze wagon to “WIN THE NEXT ELECTIONS”, after your rejection and humiliation by his cabal of UWP Negroes.

    1. The Prime Minster Dr. Anthony describes Allen Chastanet as, “Extremely dishonest”, using the adjective “PATHOLOGICAL” to describe the mental illness of the U.W.P. leader, and echoing your long held view of Allen Chastanet. It is really sad that your prophetic words are not written as a weekly article to counter the propaganda spewed by the likes of Peter Josie. The P.M. must read this Newspaper, to have quoted you verbatim.

      https://www.youtube.com/watch?x-yt-ts=1421914688&v=6aJ3yMz12vM&x-yt-cl=84503534#t=136

  3. the gas price is just one kind of many for government to collect taxes.
    A lowering gas price will reduce government revenue and it will have to increase somewhere else taxes.
    Unfortunately there is no free lunch.

  4. I have been saying it all along but I am not a PHD so no one will listen to me, however, thank you so much Mr. Prevail and I agree that the PM should review those prices immediately inorder to reduce the price of commodities on the supermarket shelves so the pooe people can feed themselves and their hungry kids.

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