The average retail prices of petrol and diesel continue to fluctuate and dominantly increasing. In March 2020, the pump price was 147vt/l and by March 2024, it has climbed to 183vt/l. This is an increase of + 36vt/l. While the price of diesel was at 134vt/l in March 2020 and increased by +48vt/l, to reach 182vt/l in March 2024. By June 2024, diesel price dropped to 174vt/l, while petrol remains at 200vt/l since the month of May 2024. Figure 1 is a summary of the 5-year period retail prices or what was paid at the petrol stations.
Generally, international price movements and the changes of the Vanuatu Vatu against the US Dollar have a significant impact on the domestic retail prices. The current exchange rate USD-VUV is at 124 VUV/USD.
The increase in the average retail petrol prices is dominantly higher due to the international refined petrol prices, Singapore Mogas 95 (Unleaded Petrol 95) and the international diesel benchmark prices (Gasoil 10ppm prices). The price volatility is also influenced by the freight rates which vary between 55 USD/MT to 101 USD/MT in the period 2020 to 2024. The local government taxes impact the retail prices as well and is currently at between 28% to 29% of the total price of retail petrol and diesel.
The monthly prices for retail petrol and diesel in the year 2024 is shown in Figure 2. Gasoil oil 10ppm has dropped from 182 VT/l to 174 VT/l. The price of retail petrol (mogas 95) remains on top of 200 VT/l for the second consecutive month, with an overall increase of +27VT/l since February 2024.
The domestic average retail prices for LP Gas are higher in Vanuatu. The average retail price of LPG is at 430 VT/kg. In the commercial customers, the price sits at 377 VT/kg, and the other bulk prices are at 381 VT/kg. Generally, the high prices are due to high demand compounded by low supply of propane internationally.
The retail fuel price of petrol is 190 vt/l and for diesel is 177 vt/l as at 3 September 2024.
Diesel (AGO10PPM) has increased by +1 VT/l, from 176 vt/l to 177vt/l while petrol price has not moved.
Fuel price commentary
Crude oil prices continued to increase gradually, trading between USD 80-87/bbl in August. Oil prices increased in August because Saudi Arabia and Russia extended voluntary crude oil product cuts through September and global oil stocks were at their lowest level since December 2022, putting upward pressure on prices. For the monthly average, Dated Brent was at USD 85.06/bbl (6% higher than July).
Crude oil prices extended their gains in August, supported by economic growth and an increase in refinery intake, particularly in US and China. The OPEC+ and Russia production cuts tightened supply of heavier crude oil, which contributed to a sharp increase in refining margins as refineries had to run lighter crudes than ideal, restricting product make particularly for diesel. China, India, and other Asian countries also supported product demand during the summer travel season. The healthy demand from Asian buyers supported both crude and product prices during August.
While the crude oil price rose for the August month average compared to July, product prices jumped, rising much more than crude particularly for jet and diesel. Petrol refining margins have risen to levels seen in January this year, driven by tighter product supply as delays in product export quotas limited product supplies from China into the Asia-Pacific region.
Regional diesel prices surged with higher crude and stronger refining margins. Favourable shipping economics for exporting out of the region to Europe, refineries coping with a lighter crude mix than ideal, and delays in Chinese export quotas tightened diesel supplies. These factors have driven diesel refining margins to an eight-month high as well. Regional jet/kerosene prices were similar to diesel with sharp increases. Chinese refiners have exhausted their jet export quotas, which could slow down exports into the region and tighten supplies.
Maritime freight rates improved in response to increased activity in the Asia-Pacific region supported by economic growth, particularly in India. These factors combined have resulted in a large increase in all product prices.
Price Outlook
Crude oil prices increased over USD 90/bbl last week, the highest level since November 2022. This is following Saudi Arabia and Russia’s September 5 announcement to extend their voluntary production cuts through the end of this year. Global oil inventories are expected to fall over that period, adding upward pressure on oil prices.
Product prices are increasing faster than crude and if they continue to rise, we expect Vanuatu pump prices to increase again next month.
Source: Shakil Kumar, Energy Advisor, Envisory (H&T)