The Seychelles Petroleum Company (Seypec) has decided to hand down the entire world price reduction to local consumers for them to fully enjoy this lower energy cost amid drop in fossil fuel prices on the world market.
Motorists in Seychelles will therefore continue to pay lower prices at a current R15.91 tag on the most widely used gasoline product, the lowest since April 2010.
Latest figures reveal a fall for the 19th consecutive month with a knocked down price from R21.97 in August 2014.
Apart from the oil prices hovering around US $31 on the world market, this comprehensive push down on the prices at Seychelles’ service stations has also been made possible by a stabilised rate of exchange of the US dollar to the rupee along with a responsible management of imports by Seypec.
The company has slashed gasoline prices since August 2014 by a cumulative percentage of 27.6%.
It is a good time to be a driver, with gasoline prices dropping well below the R16 per litre mark. World oil prices have continued to fall in the midst of oversupply of petroleum products and the sluggish demand in Asia, particularly in China. Analysts believe that oil prices are not seen to recover soon as output continues to increase, while global oil demand remains low.
“We want to do all we can to help consumers at the start of this new year. We know that our customers really value low fuel prices and that having gasoline for R15.91 a litre will really give them and the economy a boost over the coming months,” Seypec chief executive Conrad Benoiton told Seychelles NATION.
Simple calculations based on a regular domestic consumption of gasoline show that without these most welcome price reductions, the cost of fuelling a car for 52 weeks would have peaked to approximately R34,000. The savings following this tumbling prices’ galore is nearing just under R9,100 over a 12-month period ending December 2015, assuming that the full reduction was for the full period. Moreover, had the rate of exchange of the US dollar to the rupee in August 2014 (R13.15) remained unchanged instead of climbing to the present rate of 13.30, the gasoline price tag would have been R0.06 cheaper in January 2016.
“Apart from handing over all the benefits of the reductions, our company keeps the country with full and reliable energy at all times and this is flawlessly done according to our national strategic mission. Seypec operates as a commercial company with no funding or subsidies from the government. Our socio-economic mission is primarily to protect the interests of the customers but it has other fundamental mandates for the country at large,” Mr Benoiton added.
Consumers in Seychelles mostly have the five-year low price of oil on the world market to thank, but many more factors go into the cost of fuelling up. From the moment crude oil is pumped out to when the consumer hands over the money at the till to pay for a topped-up tank, the price of the commodity would have been influenced by multiple markets. In any country in the world, broadly a six-week time lag is identified between any changes in the crude oil price to a correlating adjustment in the pump prices. Unlike Seychelles, some neighbouring countries like Mauritius have not even contemplated a decrease in the price of gasoline as yet following the latest fall in the world prices. Consumers there will have to wait for long and tedious price examinations until the end of January 2016 to expect any fall in the price at the pump.
The price at the pump in Seychelles like in any other country cannot rationally follow changes in the price of crude oil. The chief price components of gasoline are crude oil, refining, transport, storage and distribution costs, retail mark-up and taxes. The first two factors tend to be more volatile, causing most of the variation in retail gasoline prices, while the latter two reflect the retail portion and tend to be relatively stable. The market for gasoline is different from the market for crude oil, which means if the price of oil drops 10%, the price of gas will drop less than that.
“Our consumers see crude prices moving and they expect retail to move accordingly and there is actually not a very good relationship between the two on a day-to-day basis,” an economist told Seychelles NATION.
“The wholesale price of gasoline moves independently of crude prices. The final price you pay at the gas station is also affected by the components other than the basic crude oil. Price falls do not feed through to the consumer immediately because stock bought at high prices has to be sold off and lower prices will only kick in once the retailer is able to restock at cheaper rates,” he added.
In Seychelles too, as previously explained, fuel price is determined by many components from the landed product cost per metric ton, the exchange rate of Seychelles rupee to the US dollar, the local taxes imposed by the government as well as the pipeline dues payable to the Seychelles Ports Authority, and finally the approved and constant margins to cover administrative and other distribution costs. The product cost and the rate of exchange of the USD are variable, while other costs which include taxes, pipeline dues and margins remain relatively fixed. Seypec currently reviews fuel prices on a weekly basis and takes into account exchange rate fluctuations as the company’s purchases average $2 million weekly. Similarly at each price review, the change in the product cost is also considered. This is what led to no less than 23 decreases from August 2014 to January 2016.
As shown in figure 1.0, the reduction in the price of gasoline by 53.8% since August 2014 is nearly the same percentage of the PLATTS Index (56.3%). This confirms that the entire reduction on the variable costs has been handed over to the local consumers. The fixed charges have evidently not changed nor increased during this period but obviously account for more now on a percentage level due to the decrease of the final selling price at the pump.
As long as the oil prices will continue its downward trend, consumers are sure to benefit at the pump and ease the pressure on their budget.
“In Seychelles, Seypec is on a daily alert to pass on the benefits of falling prices to the consumers. It is to be wished that the current oversupply of oil will be a long-term strategy of main producing countries to keep oil prices low. Our mission is to get the best product with the best prices to our fellow citizens and this is the one and only agenda of our company,” concluded Mr Benoiton.
Source : Seychelles NATION