EDB’s Center for Economic Studies validates gasoline price hike, consumer impact
The latest report by the Puerto Rico Economic Development Bank’s Center for Economic Studies confirmed that increases in fuel prices are “affecting business operations and daily life,” agency President Luis Alemañy said.
The price of any good can spike when it’s cost of production increases, inventories are scarce or its market demand is on the rise.
“The price of gasoline is an indicator that has recently shown fluctuations, attributable to different factors,” he said.
“However, the local increase in the price of gasoline is mainly due to the jump in the price of the barrel of oil, due to the reactivation of economic sectors that require greater energy consumption, after the sharp deterioration experienced by the pandemic,” he said.
“Now, as the fuel production, stock and supply increase to meet current demand, the price of gasoline should drop,” Alemañy said.
The EDB’s Center for Economic Studies is headed by Economists Gladys Medina and Juan González.
“The price of a barrel of oil fell to historic levels in April 2020. The West Texas Intermediate (WTI), one of the oil mixtures produced in the United States and used as a point of reference to follow the state of crude prices in the nation, averaged $16.55 a barrel during that month, reaching negative figures ($-37.63 ), below zero, on April 20, 2020, due to a sharp contraction in the demand for oil and its derivative products, something that had not happened before in history,” Medina said.
“This drop in oil demand, prompted by the COVID-19 pandemic, coupled with the restrictive measures to contain it, was greater than any other previously observed. This deterioration in demand caused, in turn, a reduction in the availability of oil (less extraction) and the production of its derivatives. But by May 2021, WTI averaged $65.17 per barrel,” she explained.
Because Puerto Rico imports the fuel it uses, “the island is affected by changes in the production and handling of fuels consumed,” said González.
“However, gasoline wholesalers, importers of petroleum products and electricity generating companies, including the Puerto Rico Electric Power Authority, maintain supplies that protect consumers from price increases due to unforeseen demand for gasoline and diesel on the short-term, such as blackouts caused by mechanical failures in the electrical system, or by natural or atmospheric events,” he said. “However, fuel consumption is very sensitive to this type of event.”