New gas prices— up by 7¢ on New Year’s Day
The New Year rang in with a hike in gasoline prices for the territory, while all other prices for petroleum products sold in American Samoa decreased. The new maximum allowable price (MAP) or wholesale price, went into effect on Jan. 1, 2012.
Petroleum Officer Sione Kava with the ASG Office of Petroleum Management (OPM) said the new MAP for gasoline now stands at $3.65 per gallon, a seven-cent increase, which means retail prices at the gas stations will hike past the $4 mark.
“I hate to be the bearer of bad news — with an increase in the MAP for gasoline to welcome in 2012, but that is the nature of the beast,” Kava said last Friday. “If it will make the public feel better, we are still cheaper at the pump compared to Samoa, Tonga and Fiji." he said.
One of the gas stations on island was selling at $3.99 per gallon as of last Friday, while it is $3.97 per gallon in Honolulu, he noted.
“Will we ever see the cost of gasoline at the pump under $3 per gallon again? It’s highly unlikely. I will be surprised if it ever gets lower than a few cents under $4 per gallon,” said Kava. “But then again if I — or anyone — could accurately predict futures in the fuel industry... they would be working somewhere in Wall Street making mega bucks.”
For jet fuel and kerosene, Kava said the new MAP is $3.80 per gallon, a decrease of six cents.
For diesel fuel, the new MAP has road diesel at $4.07 per gallon; boilers/generators (used by the Tafuna Power plant) at $3.75 per gallon; commercial fishing vessel diesel at $3.54 per gallon and other marine diesel at $3.57 — a decrease of four cents per gallon, said Kava.
Regarding the Ultra Low Sulfur Diesel (ULSD), used for the eleven new generators at the American Samoa Power Authority’s temporary power generation system (TPGS) in Satala, the new MAP for boilers/generators is $3.81 per gallon while ULSD road diesel is $4.13 per gallon — a three cent decrease, according to Kava.
Kava reminds the public that OPM does not set the price of fuel on island. “Our job is to assure correct calculation of the wholesale price (or the MAP) and to negotiate the MAP on behalf of the American Samoa Government,” he said. “Price at the gas station is determined by the owner of the station, not by OPM and not by ASG.”
DETERMINING THE MAP
In response to questions from the public on how ASG calculates the MAP, Kava said there are two main components: Landing Cost (Cost from the Refinery + Transportation + Supplier's Overhead) and the Local Onshore cost (Fixed Fees, Rents & Taxes).
“The Landing Cost is determined by the global Market and we have little to do with that,” he said and noted that the year 2011 global oil market was dominated by a weak US dollar and rapidly emerging economies in China and India.
Because trade is done in US dollars, China and India were able to buy more and their economy demand made them able to buy almost indiscriminately at any price dished out by the Organization of Petroleum Exporting Countries (OPEC), he explained.
“OPEC on the other hand, has decided to keep the price of a barrel between $80 and $100 a barrel for three main reasons,” he said and cited the reasons: they were able to sell it to China and India; that kept it profitable for them; but not so expensive as to push the developed nations — especially the US — to alternative energy.
Another big factor in the increase in price is due to the Japan tsunami in March last year, with more demand for oil due to the closing down of nuclear power plants not just in Japan, but around the world, said Kava.
As for the future outlook, it appears that the US dollar is gaining, China and India's economic growth is slowing down and with the possibility of Iraq getting back into full production, “we may see a drop in the cost per barrel,” said Kava.
“However, global ‘oil price’ is also very sensitive to political developments in the Middle East. With Iran threatening to blockade the Strait of Hormuz which channels 40% of the world oil transported by oil tankers, we will see an increase in the cost per barrel,” he said.
Regarding ‘local onshore cost’, Kava said that — with credit to the governor and the current administration — “we have the lowest taxes and fees added to our fuel prices compared to Hawaii and the rest of the Pacific Islands, and there has not been an increase to those taxes and fees in a few years.”
“This is keeping our fuel price at the pump cheaper compared to that of our sister islands — Samoa, Fiji and Tonga,” he said.
Kava also noted that one of the issues to be dealt with for the future, is a U.S. Environmental Protection Agency (USEPA) mandate — to be completed by 2014 — that all U.S. states and territories will be moving to Ultra Low Sulfur Diesel. “We anticipate an increase in our diesel fuel cost from the refinery,” he said.
ASPA officials first revealed this USEPA requirement during a Fono hearing last year.