Economic Indicators breaks down cost of fuel

Have you ever wondered why you pay such a high price for fuel at the pump?  What is it that determines when the price falls and when it increases?  Tonight we begin a series on the causes of the spike of fuel prices at the pump and if these are determined by prices on the world market.  We will examine the question “When the price of oil on the world market falls, shouldn’t the price at the pump fall?” Let us first look at all the costs that are incurred on imported oil as it makes its way to the pump. This analysis uses data from January 2000 to August 2012. There are three major categories of cost which include: landed cost; government charges and   commercial charges. The landed cost is composed of CIF in Belize dollars, handling; port fees; and stamp duty. While Government charges are comprised of import duty per US gallon; General Sales Tax (GST); environmental tax; and Revenue Replacement Duties.  Commercial charges are composed of:  delivery for Belize City only; wholesaler margin; and dealer’s margin service station. The charges incurred in each of these categories are for landed cost, approximately fifty-two percent. While government taxes are approximately thirty four percent and total commercial charges are approximately fourteen percent. Now let us look specifically at the costs which make up the Commercial Charges. The analysis shows that from the total Commercial Charges, the majority of the charge is taken by gross margin dealers (service station) sixty three percent; while the wholesaler margin is thirty one percent; and delivery for Belize City only is six percent.

The commercial charges translate to the amount you finally pay at the pump.  In order for the service station to make back sixty three percent, this has to come from somewhere.  The same goes for the wholesaler margin and for the delivery costs.  And in the end it comes from your pocket, as the consumer. So the next time, you stop by a gas station, and you dish out close to thirteen dollars for a gallon of premium, you will know that you are paying a high tax.  If the government did not impose such a huge percentage of tax, savings could be passed on to consumers.  And since we know that the high price at the pump affects everyone, from the consumer to industries, it is an incurred cost in production which again is translated to every consumer in a vicious cycle of inflation or inflated cost.   It affects every aspect in the cost of living.  This weakens, rather than strengthens economic growth and dampens the means to strive for economic progress. In the next segment we will look at how crude prices affect the retail prices of fuel.