Fuel price decrease causing confusion to Consumers when World Price has fallen drastically

10/06/2008 16:24

The Consumer Council of Fiji received complaints from the consumers

Prices and Incomes Board announcements of changes in the local petroleum prices every two months in response to fluctuating world prices has not been absorbed well by consumers who do not understand the pricing structure. They fail to find the link between drop in fuel prices in an international market as compared to the exorbitant prices in Fiji market or drop in prices of crude oil price internationally and increase in price of fuel locally. The concerns raised are genuine as they cannot comprehend why Fiji’s fuel prices do not match with international price movements. Fluctuations in crude oil price and the price of refined oil will have a significant effect on retail price of petroleum products. Therefore the price determination should be such that fluctuations in the global market price are closely reflected locally.

  1.  The retail price of petroleum products will be more responsive to international market changes minimizing time lag. The current bimonthly review time lag delays immediate price review to reflect global price movements. So if the oil prices are changing  globally it will give an immediate reflection of the changes in  petroleum prices locally;
  2. It provides consumers with fair and transparent petroleum prices which are to a great extent a true representation of what is happening internationally and in countries such as Australia and New Zealand. Consumers will appreciate a price structure which they can relate to with their neighbours – Australia and New Zealand;

The current bimonthly review has severe unfavorable impact on consumers due to the time lag in responding quickly to global market prices. Consumers have to pay higher prices for traveling, whether it is their private vehicle or public transportation (buses, taxis, hire vehicles, shipping and airline), and fork out extra for trickle down effect of various goods and services including freight and public utility costs. Consequently, consumer spending increases which reflects in the raising Consumer Price Index. But with a fortnightly restatement there will be a lesser impact on consumer’s cost of living adjustment. For example if we take into consideration price mechanism comparison from current bimonthly determination to proposed fortnightly determination, it will result in small price increases that can be sustained with in consumer’s budget.