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May 14, 2020

Butane Cost Increases with New Price Structure

Late on Wednesday night, the long awaited prices for LPG were released. If you have been following the LPG war, the prices is a thorny issue for the ex-importers of liquefied petroleum gas.  The National Gas Company, is now the sole supplier but the five former importers believe they can import LPG at prices lower that the National Gas Company. News Five’s Isani Cayetano crunches the numbers in the following report.

 

Isani Cayetano, Reporting

The price of butane on the retail market since the National Gas Company became the only supplier of liquefied petroleum gas in the country remains a point of contention for several past importers who controlled the industry prior to April thirtieth.  On Wednesday, the Supplies Control Unit introduced new fixed prices for butane on the wholesale and retail floors.  Jose Trejo, Director of the Belize Bureau of Standards, breaks down the new price regime.

 

Jose Trejo

Jose Trejo, Director, Belize Bureau of Standards

“We have a wholesale price and now we have an urban retail and rural retail prices.  As it relates to the wholesale price, that wholesale price is fully determined by the new investment by the National Gas Company Limited which false under the National Liquefied Petroleum Gas Project and that’s Act 12 of 2019.  So that sets the, within that act there is specific structure for the price buildup for the wholesale.  As you could imagine, it includes basically your acquisition cost, your freight, your insurance, what it costs to land that product in Belize, so that you would have there your port dues, your brokerage fees, your throughput fee.  I think it will include your environmental tax.”

 

And that price structure does not take into account a user fee which is essentially the cost of financing the project, as well as regulatory fees.  Those are just a few of the variables that are factored into the new cost of doing business.  That notwithstanding, the former LPG importers argue that the cost per gallon has gone up under this new regime.

 

Audrey Matura

Audrey Matura, Attorney for Former LPG Importers

“It’s bad news.   The response is that consumers in this country should be concerned, the price for LPG into your home has actually gone up.  It has gone up by thirty-one cents and how do we calculate that increase?  Well, we look at the price before and what is the price now and per the new SI that came out, the new price to the consumer is $3.86 per gallon.  That is in the urban areas and the rural areas is $3.96.  So just add or subtract thirty-one cents from any of those costs and you will see that it has gone up by thirty-one cents effective yesterday because that SI was signed into law yesterday.”

 

In rationalizing the cost of butane on the retail market, Trejo says that profit margins also had to be factored in, as well as the cost of transportation to rural areas.

 

Jose Trejo

“The retail basically is one of looking at the margins that would necessary for us to allow the distributors and the retailers to enjoy a decent margin downstream and that is based on the transportation cost and what have you, to move the product from Point A to Point B.  So the margins that you see there from wholesale to retail urban is a dollar and sixty-six cents and then from there, there is an additional ten cents to move product from municipality to peripheral rural communities.  So that’s in essence how the price is set.”

 

According to PM Barrow, Cabinet has given NGC the go ahead to proceed with its operations and in the months ahead consumers will see an expansion of the company’s distribution network.

 

Dean Barrow

Prime Minister Dean Barrow

“The green light has been given to the National Gas Company and so they are just starting and will of course expand their distribution network as quickly as possible.  In terms of the prices, the new pricing structure, as far as I have been told, does include some small increase in the wholesale price, presumably that’s going to find its way down to the consumer.  But I am not sure what the end result is going to be so let me hold my fire until the picture becomes clearer.”

 

So just how does the incoming price structure compare with the previous price regime?

 

Jose Trejo

“What we had in the past is basically the importing companies who import the product, they wholesale the product, they distribute the product and they retail the product.  So throughout the entire supply and distribution chain of LPG they are at every point of the distribution chain.  What this does with the new structure is it kinda levels the playing field so that a small operator who maybe has a bobtail of may two thousand gallons can go to the NGC directly to purchase at the wholesale price of $2.26.”

 

Reporting for News Five, I am Isani Cayetano.


Viewers please note: This Internet newscast is a verbatim transcript of our evening television newscast. Where speakers use Kriol, we attempt to faithfully reproduce the quotes using a standard spelling system.

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