Looking at fuel prices in Cayman

| 20/07/2016 | 0 Comments

Who is the regulator of supply of propane gas? I note that the Home Gas pricing is US$4.96 per gallon (CI$4.07). This compares to US$4.76 in Miami, Florida (see US Energy Information Administration website). I presume there is duty on the import of propane … so why is this price so comparable, when the gasoline isn’t? Surely the regulator is doing something right?

Auntie’s answer: I can safely answer the first part of your question. The regulator is the Petroleum Inspectorate, but their remit does not include setting prices. According to the department’s website, the primary responsibility is “to assess whether the petroleum and compressed gas industries are adequately managing their obligations to safeguard environment, health, and safety through regular inspections”.

As for the details of pricing, I nonetheless went to the inspectorate for help. The office of the Chief Petroleum Inspector was speedy and thorough in response: “Propane like all other types of fuel in Cayman is unregulated, hence market forces dictate prices under the free-market system in the local fuel sector.”

The inspectorate representative pointed to the Home Gas website, which listed the current price for propane delivered at CI$4.37 per US gallon (US$5.20/US gallon), then added, “Depending on the context, the reader is probably correct that it does compare to current residential prices in Florida, at US$4.76/gallon.”

The duty on propane is 22% of CIF (cost, insurance and freight) value per imperial gallon.

He then addressed the cost of petrol, which I know is high on everyone’s list of concerns. He first acknowledged “a significant differential … between Florida and Cayman gasoline prices at the moment as compared to the spread between the respective propane prices for Cayman and Florida”.

The representative explained that propane, like gasoline and diesel, is a globally traded commodity. “There are unique logistics issues relating to countries around the world to get their LPG supplies, which will dictate the price; however, there is always one relatively common element in the price build up – refinery prices.”

On top of that, you then need to add such things as freight, duties, port fees, other taxes and margins. In addition, LPG is delivered to Florida via pipeline and barges/tankers, while Cayman is restricted to transport via tankers.

As for dealing with prices, he said, “Not sure which regulator can be credited for keeping the LPG price in Cayman and Florida within range, but the monitoring of prices to inform policies in the future is now part of our remit and will soon transition to the ‘Public Utilities Agency’.” (See CIG seeks public input on fuel regulator plans for more details)

The Petroleum Inspectorate will soon be taking their act “on the road”, as it were, on a public education exercise to discuss future changes to the legislation, the representative said, “as I am aware the public has a huge appetite to know what to expect regarding prices going forward”.

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