Factors that Influence Fuel Prices in the ECCU
The price citizens and residents in the Eastern Caribbean Currency Union (ECCU) pay for fuel is subsidised by the respective governments to ease the impact of the increases in oil prices on the international market.
Speaking on the ECCB’s weekly public education programme, ECCB Connects, Economist in the Research, Statistics and Data Analytics Department, Leon Bullen, says that the current increases in oil prices are mainly due to the ongoing war in Ukraine and its related geopolitical issues. He adds that the cost of crude oil on the international market influences the cost of fuel.
Bullen explains that the Brent Benchmark is used to set the price of most of the world’s traded crude oil and that international prices affect the price of fuel on the domestic market.
Bullen further points out that the other factors that determine the price of fuel in the ECCU are: government taxes and levies; government subsidies and price caps and government pricing regimes such as the Pass Through System. He said that some governments use the Full Pass Through System, which allows international prices to be fed through to domestic prices at every shipment of fuel. Other governments use the Partial Pass Through System, which uses the average price of the fuel over a specified period of time, generally four weeks, and this is the price consumers pay. This, he says, has the effect of smoothing large jumps in the price of fuel, thereby making the price increases less heavy on consumers.
To view the full discussion, log on to the ECCB’s YouTube channel and Facebook page: ECCB Connects.