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Jun 5, 2013

How to determine the price you pay for gas

The cost of liquid petroleum gas (LPG) has been the subject of much speculation. The price varies according to where the gas is imported from. Mexico’s prices have been regularly more costly since the LPG is of a higher quality. But the LPG imported from Central America is an issue as suspect invoices often cause the prices to go higher. Mike Singh of the Ministry of Economic Development said that the entire formula for pricing LPG changed in January. The pricing is no longer determined only by cost, but by the ratio of the LPG mixture.

 

Michael Singh, C.E.O., Min. of Trade, Investment, Private Sector Dev.

Michael Singh

“What we found is that there was a disparity between what we get from Mexico and what we get from Central America both in terms of price and quality. In the case of Mexico, the supplier buys directly from Pemex, which is government-owned company. Those pricing requests always came with a quality standard that came with it and in the past, we allowed a disparity in price because we would say that we would allow the Central Americans to sell at a different price than the Mexicans because the quality was not the same. And it seemed that there was a market for a lower quality butane—I should say LPG not butane because LPG is a mixture between butane and propane. What we did in January is that we realized that this was not working because we found out that with the Central American importers, there were middlemen companies that was owned by the same company that is producing; that would re-invoice. So we had no way of knowing whether the invoice that was presented to us was really an accurate invoice of the actual value or cost of the good. While in the case of Pemex, we got actual invoice from Pemex which is the producer and it is government company so we tend to have a lot more reliance on the accuracy of those invoices. So what we did in January, we changed the whole formula. We said look, we will only allow LPG that comes at a minimum quality of sixty-forty mixture. We also made a change that rather than rely on invoice values, we would take a global index, the global index for the commodity of LPG, and we would allow a variance against that index and an adjustment for logistics that would be standard across the board that nobody could vary. Which meant that once a month, we would take the Mont Bell Index pricing, we would look at it and then we would then determine that this is what you are allowed to sell as opposed to using your invoice value. What we find that has been happening is that there have been accusations by some importers that other importers are not selling the same quality. So what we have done, we have actually ordered the equipment which has arrived in Belize which we have in use now where we are doing spot checks on importers in their storage facility to test the gas to make sure that they are within the mixture. If they are not within the mixture, they are disallowed from selling that lot. Now one of the things that we have done with the Central Americans because they had an amount of stock in Belize in the stock when we put the rule in place, we are now allowing them to bring in additional butane to mix within that stock to get up to the ratio. So yes, I will agree with you that sometimes there are stocks in Belize that will not meet the ratio, but we are allowing them to mix and add butane to that stock. Whether or not they do it a hundred percent is very difficult for us because our resources are very limited in being able to cover the entire country.”

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1 Response for “How to determine the price you pay for gas”

  1. venus says:

    Still waiting for scales to be use in the South

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