On The Flip Side

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Knowledge is power as it gives us the opportunity to make informed decisions and to this end we continue to delve deep into the LPG situation, which looms over our collective heads, in an effort to make sense of it all.  The state controlled importation and distribution of LPG is neither a recent nor original construct.  We have only to look to Costa Rica to witness how the very same idea was put into practice in an effort to regulate prices, protect the consumer, protect the supply and comply with the national de-carbonization plan.  We must learn from both the successes and failures of our neighbors all the while remembering our own objectives and tailoring to our specific needs and conditions.  Plans must be based on sound research, honest numbers and policy that is geared toward social justice and not just the personal enrichment of a few.

There are some curious facts that we would like to share.  For instance the current world price for LPG is at 0.61 US per litre.  Our current retail price is at $4.75Bz per LPG imported over land has a cost of $2.35 BZD per gallon and if the importation comes in through the sea then the cost in Belize is $2.00Bze per gallon. We are told that once the Oligopoly comes into full effect it will resell at $3.00 per gallon and make a dollar from every gallon.  Belize uses on average little over 1 million gallons of LPG every month.  The LPG importers claim that they have been in Belize for over thirty years and it is anyone’s guess why they had not been able to offer Belizeans more affordable prices before now.  However, in April 2018 Tomza Gas and Zeta Gas were both charged for anti-competitive practices in the LPG market by authorities in El Salvador.

We have been in consultation with some medium and large importers whose business is being affected by the shenanigans of the larger importers and the new oligopoly and even the Bureau of Standards.  This last one has given a list of new regulations and upgrades which will soon become effective.  The concern from some quarters is that they have made significant investment in trucks and fleets which will now no longer meet the guidelines for the Bureau of Standards (BS).  They say that the upgrades are costly and that the new prices to come online early next year will not give them a margin to be able to effect the necessary upgrades.

Another concern is that the new importer will sell for the same price to anyone buying over 2,500 gallons.  This requires little investment and will cut off those companies that import and distribute and who have invested heavily in equipment to import, transport and store bulk quantities of LPG.  Their recommendation is that those companies that are currently importing be allowed to continue to do so, and in that way allow them a better margin to make the required improvements in their equipment.  The other recommendation is that the new importer differentiate and sell only to distributors by bowser loads at a preferential price and allow them to use their already established distribution networks.

The IMF in their report titled The Other Side of The Boom states that “Energy companies- particularly state owned firms-often… relied on government commitments to cover investment projects or losses. Such transfers were generally not well documented or transparent.”  In addition the IMF also said that “Effective reforms can introduce regulatory stability to price-setting and healthy competition to the energy sector…which can aid the development… and reduce the risk of future price shocks.”  Many will share the sentiments of the Hon. Cordel Hyde, they don’t want to be taken advantage of by any company, local, public or international.  LPG is not a luxury commodity, it is a necessity.  Belizeans understand that those companies that sell LPG must make a profit to operate and continue to provide the services.

The truth is that the landed prices of LPG will remain the same and the only difference will be that the middle men, those who have worked and invested, will be cut out to make room for the Belize National Gas Company.  This will only cut down on the margin for the retailers.  An important question is then if there is no savings passed on to the final consumer, why must a space be made for a chosen few to enrich themselves further?  Why not work with the importers we currently have to ensure the supply and to allow market forces to dictate prices to the benefit of Belizeans?  This week we ended with more questions than answers, but we will continue to follow the paper trail and see where it ends.  #followthemoney