Texaco says rules won’t help

The country’s second local fuel supplier has now raised its concerns over government’s decision to introduce regulations regarding the way fuel is priced. Chevron Caribbean Inc, trading under the Texaco brand name in the Cayman Islands, said in a statement that regulation would not be the best way to resolve the problems of rising fuel costs.

"Although sensitive to the Government’s concern over the high fuel prices, regulation is not the best way to address the matter, since it will not allow market forces to work in favor of the consumer,” the oil firm said.

Chevron specified that prices are posted at all Texaco service stations so consumers can have information that allows them to make their decision on where to purchase gas. That makes competition react, getting the market working for the consumer. The company explained that their prices are based on the cost of the product in the international market, which has been rising since the beginning of the year, influenced by several factors such as the weakness of the US dollar and fundamental factors that impact the balance of supply and demand of crude oil, making product prices reach record levels this year.

Echoing the sentiments made by Alan Neesome, Country Manager of Esso, that the current volatility in the oil market is a worldwide problem, Texaco said the issue was a global phenomenon, not only impacting the Cayman Islands.

Last week Neesome told CNS that government’s decision to have oil distributors notify the Chief Petroleum Inspector before increasing their prices goes against the principles of a free market. He said it was biased against the oil companies, but above all it would not address the problem of escalating fuel costs.

“Competition is to the benefit of all consumers and Governments must promote equal treatment among market players, industries, technologies and favour policies that enhance competitiveness,” he said.

Government announced plans at the weekly cabinet press briefing to amend the Dangerous Substances Handling and Storage Law (2003) to regulate the process by which the two wholesale distributors of gasoline and diesel and any other future distributor could increase their prices. The oil distributors will have to notify the Inspector in writing of plans to increase fuel, and failure to notify the Inspector could result in a fine of $10,000. Leader of Government Business Kurt Tibbetts explained that the Inspector would be required to consider relevant factors, which may include data provided by the wholesalers, or public interest in making his decisions and if wholesalers are dissatisfied they would be able to appeal.

“Oil prices are siphoning money out of everyone’s pockets,” said Tibbetts. This government’s foremost responsibility is to look after the welfare of its citizens, and this is exactly what we hope to do with these amendments.”

However, Neesome noted that comparisons between regulated oil marketswith free markets reveal that consumers are best served by allowing market forces to determine fuel prices.

“Government policies that minimise interference in the free market system are the best course to ensure adequate supplies,” added Neesome. He explained that while many people assume wholesale or retail regulations protect consumers from higher prices,  he said that more often than not such market distortions undermine service, supply and reliability by encouraging gasoline consumption and discouraging investment, but above all the government would not prevent international price variation from impacting local prices.