Press Statement on fuel price - AG

Mr Aiyaz Sayed-Khaiyum

1. As you know that we had announced a couple of weeks ago, we had a meeting with the Oil Companies where there was an agreement that we will have price reviews not on a monthly basis but on a quarterly basis to give consumers, the oil companies and all stakeholders within the Fijian economy confidence and stability in terms of planning for their businesses, for their household budgets etc.

1. This move is a policy issue to shift the ‘review time lag’ for petroleum products from a ‘monthly restatement’ to a ‘quarterly restatement’ of petroleum prices.  The ‘quarterly restatements’ of prices are based on three months average of international benchmark; Means of Platts Singapore (MOPS), average exchange rate and international freight and handling charges.

1. The last fuel review was carried out in December 2010 and the last effective price increase was on 17 January 2011.  So it was three months ago that we had a price increase and we have not had an increase since then.

1. Verifications of submission by the three oil companies – Mobil, Pacific Energy South West Pacific Limited & Total (Fiji) have been completed. These submissions are based on averages Means Of Platts Singapore, MR Tanker Freighting and WBC Exchange Rate.

The New Prices:

1. What we also would like to point out is that this does not mean that bus fares will increase.  As you know that we have a agreement with the Bus Operators Association that should the world price per barrel go up to US$140, only then will the Bus fare price increase take into effect.

Reason for Increase:

1. i. World market movement – the Asia-Pacific benchmark Tapis crude continued its rise since October 2010. Thus for the 1^st quarter of 2011, recorded averages were as follows;

• January – reaches US$100.350/bbl
• February – reaches US$107.659/bbl
• March – reaches US$120.494/bbl

Overall, the average price of Tapis crude in the 1^st quarter of 2011 was recorded at US$110.102/bbl, an increase by over 20% from the previous quarter & a 38% increase compared to the 1^st quarter of 2010.

The key factors contributing to the recent price surge has been the early onset of winter weather, which in turn led to significant rise in demand. Other factors contributing to price increase include the ongoing political unrest in North Africa and the Middle East along with the shutdown of the Trans-Alaska-Pipeline.

In particular, changes in the ‘products prices’ were as follows;

1. The Asia Mogas (Gasoline 92) continue to gain ground in the 1^st quarter 2011 being assessed at US$111.379/bbl, a 20% gain from the previous quarter (4^th quarter 2010) showing pressures from tighter market, due to heavy refinery turnarounds especially at key export refineries & firm demand form Indonesia, the Middle East and South Africa.
2. The price of Asian Kerosene loading in Singapore hit a 30 month high in the 1^st quarter of 2011 reaching an average of US$120.936/bbl. The rise in price was seen as a function of European demand in addition to stronger jet market in the region & declining jet stock levels due to longer than expected global winter.
3. Asian Gasoil prices neared a 30 month high as most of the region headed into refinery turnaround season as as growing concern about oil supply from the Middle East & North Africa prompted a rise in overall prices. Japans 2011 earthquake also plays a major role as demand for the product rises. The 1^st quarter average price of Singapore Gasoil rose by over 22% from the previous quarter to be assessed at US$120.867/bbl.

1. Freight – the Singapore – Australia clean tanker spot freight fell in the 1st quarter of 2011 by 13%. The Singapore – Australia route was assessed at w185, a decrease of w28 points from the previous quarter’s assessed levels. The Singapore – Australia medium range tanker market remains stable with consistent number of cargos & increased activity.

1. Exchange rate movement – the Fiji dollar appreciated by 0.67 percent against the US dollar during the 1^st quarter of 2011. This will put some pressure on local fuel prices.

-End-