Reduction in oil prices seen

Car owners in the Northern Marianas can look forward to lower pump prices of petroleum products following the stabilization of world crude oil prices due to the increase in production of major oil-exporting countries.

Dubai crude, which is the benchmark for most oil firms in Asia and the Pacific, has dropped to about $22.90 per barrel from an average of $25.06 per barrel in March and as high as $28.40 in the first week of last month.

Government officials said a rollback of local fuel prices should be possible if the crude oil price movement continue its downward trend. Current pump prices of the oil refining companies were pegged at a Dubai oil price of about $22 per barrel.

Development Authority Board Chair John S. Tenorio said pump prices of petroleum products are anticipated to decline if the situation in the global and regional markets continues.

But Mr. Tenorio explained that oil companies are expected to act on a possible rollback only after they have recovered the additional expenses incurred due to the series of price adjustments in the international market since last year.

He also pointed out that current oil supplies shipped into Guam and the Northern Marianas are probably procured during the time when prices of petroleum products in the Singapore regional market are at record highs.

This means that car owners in the Northern Marianas are not likely see immediate adjustments in pump prices of petroleum products when they fill up.

Mobil Oil Marianas said the company has been monitoring the situation in the Singapore regional market and has not seen the impact of increased production by the Organization of Petroleum Exporting Countries.

“We have not seen the impact of the anticipated reduction in our area and that we could not speculate at this time when our wholesale prices will begin to drop,” said Mobil’s Cecile Bamba Terlaje, manager for government and public relations, said in a telephone interview from Guam.

Mr. Tenorio said the public should give oil firms time to regain losses incurred due to their inability to raise pump prices in step with the international market.

In a previous statement, Mobil Oil Mariana Islands Vice President and Sales Manager Abi Adigun said the company exercised a status quo in the prices of its petroleum products despite the increase in the international market due to Y2K bug-related fears.

Mr. Adigun pointed out that the oil company held back on price increases in anticipation of an eventual downward movement in world and regional prices after year-end inventory build up.

Costs have, however, continued to rise as OPEC participants continue to stay within their reduced production quotas and seasonal and regional demands make their impact felt.
Costs of petroleum products in the regional market in Singapore shot up by more than 30 cents per gallon since Jan. 1, 1999 while Mobil prices have been adjusted by only 21 cents per gallon over the same period.

Oil firms have focused heavily on initiatives to reduce expenses over the past year and improve operational efficiency without any compromises to safety. This has helped tremendously to offset negative effect of rising product cost.

Aside from external market forces, the taxation system in the Northern Marianas is also putting more pressure on oil companies to sell fuel in their service stations at a higher cost.

At present, the CNMI government imposes 15 percent in excise tax for every gallon of fuel. This means that car owners may have actually been paying $0.3 more per gallon of regular and premium gas whenever they would fill up.

This should set the difference between prices in Guam and the mainland United States and in the Northern Marianas where consumption is not as high, thereby, adding to the oil companies’ operational costs.

Average pump prices in the mainland U.S. dipped nearly 2.5 cents per gallon in the past two weeks at $1.5709 per gallon.
The reduction, the biggest since the winter 1998 oil glut, was brought about by falling crude oil prices, as producing countries decided to increase production.

OPEC last month decided to increase production by 1.7 million barrels a day. This has been expected to result in lower prices this summer.