fp Turks and Caicos

“West Texas Intermediate Crude and Brent North Sea Crude in London all traded above $90 per barrel during the month of December with Brent North Sea Crude eclipsing $98 per barrel on the morning of Jan. 12,” explains Caribbean Energy President and CEO Brian Lightbourne.

Crude oil prices have been on a slow rise over the past 27 months, but skyrocketed in the fourth quarter of 2010. This has a direct affect on the local price paid at the pump, explains Lightbourne.

“There are many factors which contribute to a rise in crude oil, and it is something we simply cannot control,” he says. For example, recent incidents last week such as the temporary shut down of an Alaskan pipeline, the Canadian Oil Sands Refinery fire, the weekly U.S. stockpile inventory report, the valuation of the U.S. dollar against other currencies and production quota non-compliance by OPEC members all contribute to speculation and increased prices, he noted.

The rise in fuel prices creates a double impact for the consumer in the Turks and Caicos Islands. Factored into the fuel price is not only the base price of the gasoline, but also transportation costs. Freight costs include a bunker fuel factor which fluctuates along with oil prices, creating increases in transport costs, which Lightbourne says all contribute to the currently high prices seen locally at the pump.

This all comes at a time shortly after government taxes were increased by 25 cents per imperial gallon in the summer of 2010. Current duty and road tax rates for gasoline are at 94 cents per imperial gallon, which equates to 82 cents per U.S. gallon of gasoline paid at the pump.

Diesel fuel is taxed at a lower rate of only 61 cents per U.S. gallon, but Lightbourne says because of limited volume (turnover), base prices are slightly higher and therefore do not equate to the same difference at the pump.

He adds the prices being paid in the TCI are in line with prices being paid at U.S. stations, when items such as taxes and transportation are factored into the price. On Wednesday, the South Florida average was reported to be $3.1771 for a gallon of gasoline. Locally prices are hovering at, and in some cases exceeding, $5 per gallon.

As for what we can expect in the future, analysts are predicting prices of crude to approach $100 per barrel during the latter part of 2011, but how long will the run last?

Lightbourne says we are reaching a point where prices affect consumption. “Typically there is a self correction, whereby the consumers decrease their consumption and commodity prices correct themselves due to increasing inventories.” He says this means prices will eventually fall.

But, he notes, with so many unknown variables such as winter storms, refinery/pipeline maintenance, geopolitical factors and financial recovery (job gains/losses) in the largest oil consuming economies, it is extremely difficult to gauge such a speculative market.