Petroleum Update - September 2013

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CARIBBEAN ENERGY INFORMATION SYSTEM (CEIS) SEPTEMBER 2013 ISSUE

the electricity and transportation sectors. This heavy dependence on the flow of this rare commodity will continue to increase Caribbean nation’s vulnerability to external shocks in terms of increased cost of inputs which ultimately lead to global uncompetitiveness. Governments in the Caribbean are now examining with greater scrutiny the impact of oil prices on costs incurred in both the electricity and transportation sectors in an effort to reduce costs and achieve greater efficiency in these sectors. This issue of the

Petroleum Update will seek to explore the electricity rates in selected Caribbean countries and the surcharge component included in these rates.

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Energy is the lifeblood of the Caribbean economies and plays a crucial role in their economic survival. In light of increased global warming, energy and the environment have now become crucial aspects in the sustainable development objectives of Caribbean governments. This energy imported and consumed is primarily in the form of petroleum and petroleum based products used mainly in To access CEIS website CARIBBEAN PETROLEUM UPDATE

continued on page 2/ CONTACT US

Caribbean Energy Information System Scientific Research Council Hope Gardens, Kingston 6, Jamaica 1-876-927-1779 (Telephone) 1-876-977-1840 (Fax) ceis@src-jamaica.org www.ceis-caribenergy.org

is a monthly Bulletin which highlights petroleum issues affecting or relevant to the Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.


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Call: 1-876-927-1779 | Caribbean Petroleum Update : September 2013

Electricity Rates in the Caribbean and the Fuel Adjustment Factor!.............‌.. continued from page 1 It is important to note that the growth and ability of any economy to withstand increasing global oil prices will depend on its fiscal position. With Caribbean nations tightening fiscal space, cushioning the effects on electricity rates due to exposure to rising fuel costs is almost nonexistent; however there are a few exceptions. With a dynamic economy and a diversified industrial base like Trinidad and Tobago and most importantly an oil producing nation, electricity rates in that country are quite low as everyone would imagine. The average residential/ domestic rate in Trinidad and Tobago as at April 2013 was US$0.05 per kWh. Suriname follows with US$0.08 per kWh and then Cuba with US$0.10 per kWh. Electricity rates in Trinidad and Tobago and Suriname does not include a fuel adjustment factor and rates in Cuba are heavily subsidized by the government. These rates compare favorably with other Caribbean nations like Antigua and Barbuda and Jamaica that pays US$0.44 per kWh and US$0.32 per kWh respectively inclusive of a surcharge rate for the corresponding period. Since the Caribbean is heavily dependent on imported fossil fuel for electricity generation, increases in global fuel prices most times will impact the electricity rates charged by utility companies. Consequently, the high price paid for the commodity will be recouped in the monthly surcharge or fuel adjustment factor on electricity bills. Electricity costs in most Caribbean countries include a surcharge or adjustment factor that is calculated taking into consideration the price of oil among other factors. With the escalation of oil prices and the increases in fuel surcharge, the question that comes to mind is, does oil prices directly impact the fuel adjustment factor and by extension the overall electricity bill of consumers in Caribbean countries? Whenever there is conflict in the Middle East, the world experiences a rise in fuel prices. Since Caribbean nations are highly dependent on fuel to run their economies especially for electricity generation, the increase in global fuel prices impacts the electricity costs incurred. This occurs if there is an increase in the fuel cost. Consequently, the high price paid for imported fuel will

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impact the monthly adjustment factor of most electricity bills and results in an overall increase. Take for example, Dominica, in April 2012 when the price of fuel was above US$100/bbl, the fuel surcharge escalated to US$0.196/kWh from US$0.148/kWh. As a result, the overall bill for consumers increased. However, Dominica experienced some relief in their overall electricity rates as there was a reduction in electricity surcharge in 2013, surprisingly from an unlikely factor, rainfall. In July 2013 the fuel surcharge reported was US$0.122/kWh, the lowest ever experienced, this reduction was attributed to rainfall and increased used of hydro-power generation. In addition, based on CARILEC’s Tariff Survey of 2012, St. Lucia was placed among the lowest electricity rates in the Caribbean for residential customers. Furthermore, when electricity rates in 2012 is compared to the first half of 2013, consumers paid less for electricity as a result of a fall in the fuel surcharge. The surcharge moved from US$0.016/kWh in January to a negative -US$0.017/kWh in June 2013. LUCELEC fuel surcharge is the difference between the current price paid for fuel and the average price the company paid in the previous year. Furthermore, a negative fuel cost adjustment occurs when the current price for fuel is lower than the average price paid for fuel in the preceding year. The fuel surcharge that will be applied to electricity rates in St. Lucia as at October 2013 is -US$0.0055/kWh. In an effort to reduce any fluctuations in fuel surcharge and increases borne by consumers LUCELEC has managed to keep the surcharge component to a minimum due to fuel price hedging. What this simply means is that fuel is paid for at a lower price than what is currently offered on the international market. This is done by paying an established price to have some level over its cost in the future. Whilst St. Lucia enjoys lower electricity rates when compared to its Caribbean counterparts such as Jamaica, Barbados and Antigua and Barbuda, factors such as the

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Caribbean Petroleum Update : September 2013 | Call: 1-876-927-1779

size of the respective countries, the dynamics of residential and commercial use of electricity as well as the extent of government subsidization of electricity must be considered. In the case of Jamaica, the fuel surcharge applied to JPS consumers electricity bills for September 2013 is J$25.84 per kWh (US$0.25/kWh). Other Caribbean rates for the same period are Bahamas (US$0.1573/kWh), Barbados (US$0.20) and St.Kitts (US$0.1184)/kWh. With the exception of Trinidad and Tobago, these countries mainly depend on imported fuels to meet its transport and electrical energy needs. With the obvious high cost of petroleum fuels, as well as electricity in these countries, competing on international markets have proved difficult. The volatility of petroleum prices and the negative impact on electricity cost remains a major challenge for the long term sustainability of Caribbean economies.

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Conclusion The development of the Caribbean economies will be heavily dependent on the industry’s access to dependable and affordable energy sources. The increasing electricity demand and population growth will require continued growth of electricity generation capacity and outputs. If fuel prices on the global market continue to increase, the cost of generating electricity will also increase. As a consequence of higher fuel costs, the fuel surcharge will increase and result in higher electricity bills for consumers. Whilst some Caribbean countries enjoy lower electricity rates relative to their Caribbean counterparts, it is important that measures relating to conservation, efficiency and renewable resources be further explored. Evidence of increased use of renewable energy (hydro in the case of Dominica) for electricity generation can ultimately result in a reduction in electricity rates to consumers.

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Call: 1-876-927-1779 | Caribbean Petroleum Update : September 2013

PETROLEUM NEWS & HAPPENINGS Doubts over T&T-Guyana power project [...]...Read more Higher Demand For Ultra-Low Sulphur Diesel [...]… Read more Pothole-Filled Road to Cheaper Energy [...]...Read more New Energy Initiative Will Void JPS Licence [...]… Read more Not true [...]...Read more Azurest to pay US$6.9m deposit for 360mw energy project [...]...Read more

Tough Call: Govt in a Rush To Reform The Energy Sector...]...read more

Venezuelan President to visit Trinidad and Tobago to sign energy agreement [...]...Read more JPS Foundation Partners With Kiwanis Club to Refurbish Science Lab at Holy Trinity High School [...]...Read more

Bec’s $250m Bond Deferred To Stop Reform ‘Handicap’ [...]...Read more

It’s Azurest! [...]...Read more

Tanker drivers head back to work [...]...Read more

Berbice power disrupted after vessel runs into Canefield pump house [...]...Read more

Herdt: An oliman applauds new fracking law [...]… Read more Bartica power back to full capacity – GPL [...]...Read more PSOJ wants 360 megawatt evaluation report made public [...]...Read more Theft of Oil From JPS Substation Results in Interruption in Power Supply [...]...Read more Bahamas Requiring $1bn In Short-Term Infrastructure [...]...Read more JPS Foundation to invest $2 million to bring power to York Town Basic [...]...Read more Dominica to give Venezuela agriculture products in exchange for fuel debt [...]...Read more

Sept 22 – 29 is Engineers’ Week [...]...Read more Cabinet considers latest report from OUR on 360 project [...]...Read more T&T, Venezuela sign ‘gas’ agreement [...]...Read more Belize: US Energy Company must suspend oil exploration [...]...Read more T&T able to diversify into new energy sectors says FCB CEO [...]...Read more Power plant concern [...]...Read more Announcement on PetroCaribe debt repayment deal cancelled [...]...Read more

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Caribbean Petroleum Update : September 2013 | Call: 1-876-927-1779

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REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP SEPTEMBER 2013 Retail prices for Regular Unleaded Gasoline in the eleven Caribbean countries reviewed at the end of September 2013 showed marginal increases in prices for Barbados and St.Kitts and Nevis of 1.4% and 1.67% respectively from August to September 2013. Prices in Antigua and Barbuda, Bahamas, Grenada, Saint Lucia, St.Vincent and the Grenadines and Trinidad and Tobago remained stable. However, there were decreases in prices in three countries namely; Belize, Dominica and Jamaica between 0.3% and 4%, with Jamaica experiencing the highest decrease of 4%. 

Regular Unleaded Gasoline: Average Retail Price (US$/Litre) 2013 COUNTRIES

JAN FEB MAR APR MAY JUN JUL AUG SEP AVG

1.23 BAHAMAS [91 OCT] 1.37 BARBADOS 1.58 BELIZE [87 OCT] 1.33 DOMINICA 1.18 GRENADA (95 OCT) 1.29 JAMAICA 87 Octane[E10] 1.25 ANTIGUA/ BARBUDA

1.23 1.41 1.58 1.33 1.20 1.29 1.28

1.23 1.52 1.58 1.54 1.28 1.35 1.26

1.23 1.50 1.58 1.54 1.28 1.35 1.24

1.23 1.43 1.71 1.53 1.28 1.33 1.25

1.23 1.43 1.63 1.54 1.28 1.31 1.25

1.23 1.42 1.64 1.53 1.28 1.32 1.26

1.23 1.44 1.64 1.54 1.28 1.32 1.27

1.23 1.44 1.67 1.53 1.26 1.32 1.21

1.23 1.44 1.63 1.49 1.25 1.32 1.25

NOTE: *US Gallon = 3.785 L *Imperial Gallon = 4.546 L *As at November 1, 2009 MTBE was phased out from all gasoline blends in Jamaica and replaced with 10% Ethanol.

1.35 1.33 1.35 1.22 1.17 1.24 1.21 1.20 1.22 1.25 1.26 1.26 1.28 1.30 1.32 1.32 1.31 1.31 1.31 1.29

ST. KITTS/ NEVIS ST. LUCIA ST. VINCENT/ GRENADINES TRINIDAD/ TOBAGO [92 OCT]

1.22 1.22 1.12 1.15 1.17 1.17 1.17 1.14 1.14 1.17 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42

See prices for all products at www.cippet.org

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Call: 1-876-927-1779 | Caribbean Petroleum Update : September 2013

Analysis of the International Crude Oil prices over the three months period July - September 2013 saw prices in September averaging over US$100 per barrel at US $106.61/BBL. When compared to the average prices seen in July and August this average price was approximately 2% and 0.8% higher respectively. The highest weekly price seen in September for the product was US$108.77/BBL reflected in week one while the lowest price recorded was US$103.1/BBL seen in week four. This price was approximately 2.4% higher than the lowest price seen over the three months period (first week of July 2013 of US$100.65/BBL. An average of the three month’s average prices reflected US$105.64/BBL. The increase in crude oil prices in September 2013 is attributed to the ongoing conflict in Syria and the Middle East and its impact on the global oil market.

Average Monthly World Crude Oil Prices (2010 - 2012)

US$/BBL

109.61

106.0

110 100

88.14

90 80 70

2010

2011

2012

60

Jan

Feb Mar Apr May Jun

Jul

Aug Sep Oct Nov Dec

Period

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Caribbean Energy Information System (CEIS) primary report of historical annual petroleum energy statistics provided for 18 Caribbean Countries. Included are data on total energy production, consumption, and trade; overviews of petroleum, natural gas, electricity, as well as financial and environmental indicators for over twenty years.

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