Skyrocketing fuel prices, but cash to gas ratio is low
Debate on the budget 2011-2012 starts this Thursday and you can expect fiery opposition from one side of the house. One issue that is surely to get its share of attention has to with the removal of GST on gasoline and diesel and its replacement with an increase in import duties. That measure was announced on March eleventh when the budget was presented and by this Monday, it had sent the prices of fuel through the roof. News Five’s Isani Cayetano found out that while GST on fuel was refundable to the business sector, it doesn’t now apply to the new regime.
The spread of consequences from recent instability in Egypt as well as the ongoing political turmoil in Libya, both countries whose economies are heavily reliant upon the export of oil and petroleum respectively, is far-reaching. The ripple effect has seen a spike in the cost of fuel on the world market.
“On the home front Belizeans have been suffering from severe gas pains at the pump prior to the unrest in the Middle East. Another upsurge in fuel prices which took effect earlier this week has left consumers with a burning hole in their pockets.”
At the beginning of the year the cost per gallon of premium gasoline rose to ten dollars and twenty-nine cents and has remained on a steady increase. In early January Prime Minister Barrow told News Five that projections made by the Organization of Petroleum Exporting Countries would not exceed eighty US dollars per barrel of crude oil in 2011. As such government had no need to revisit the one-dollar fuel tax it levied a few years earlier.
“The OPEC people are saying that they expect oil for 2011 to trade between the seventy and eighty dollar per barrel range. If that’s what happens, there is no need for me to revisit the tax. If this drops now back down to under ninety-dollars a barrel doesn’t hold, if it goes back up about ninety dollars a barrel and trading at over ninety dollars a barrel does hold for three months or so, then at budget time I will have to do something.”
Three months and three consecutive increases later the cost per gallon of diesel has climbed sharply to well within the twelve-dollar range. Prior to this most recent hike the P.M. during the 2011-2012 Budget Presentation stated that an S.I. would be enacted to exempt gasoline from General Sales Tax.
Dean Barrow (File: March 11th, 2011)
“For effective this very day, we will sign into a law a statutory instrument that will zero rate the GST on gasoline, illuminating kerosene and diesel. In its place, we will increase the import duty on gasoline and diesel at a fixed specific rate amount. This amount will not be equivalent to what the GST take is currently—at over one hundred U.S. dollars per barrel, but it will be equivalent to what the GST take was when the world oil prices were in the U.S. eighty-five dollar per barrel range. In effect Mister Speaker, the Government will no longer gain, however slightly, from any rise in international oil prices.”
The change in policy has brought with it a slew of concerns from the business sector. Foremost among them is the fact that they will no longer be able to recover GST on fuel acquisition. Government on the other hand will see an increase in revenue because it will not refund those monies. For Esso Standard Oil—the largest local importer—that cost is passed on to its primary buyers, Sol Belize and Chevron Belize Limited. They in turn are caught between absorbing the additional dollar per gallon of fuel and raising prices at the pump to compensate for the shortfall.
At the Belize Diesel Service Station in Belize City consumers can take advantage of a discount being offered on the cost per gallon.
Andre Castillo, Manager, Belize Diesel Service Station (File: February 24th, 2011)
“What we’re trying to let everyone know is about a promotion that we’re going to have starting this Sunday and going on every Sunday in March. We’re offering fifteen cents off per gallon of fuel. It’s just a way of giving back to our customers. Right now the price of fuel is through the roof and it’s just a way of showing gratitude to the customers that have been managing the Texaco Gas Station here. So it’s just a way of saying thanks and as well trying to improve on sales and trying to bring about more clientele to our gas station.”
Beyond the individual sales promotion is a lingering question, why an abrupt change in standard procedure which has been to move away from import duties in favour of consumption taxes? Reporting for News Five, I am Isani Cayetano.
According to one business person, the new import duty will also impact domestic production, which means that locally produced goods will be more costly.Email This Story