Thursday, May 29, 2008

Gasoline and Diesel Prices

Today at noon (legally, but usually sooner than that) we'll see the rise in gasoline and diesel prices here.  This one will be a whopper.  Don Ray will do his best to depress us all by posting pictures of bombas in David with their new numbers. 

When we moved here four years ago, we bought a truck with a diesel engine for two reasons--better fuel efficiency and the price of diesel was 40-50 cents cheaper per gallon than that of gasoline.  Double win.  this was unlike the situation in the US where diesel has always been significantly more expensive than gasoline every place I've ever lived there.

When fuel prices started their upward trajectory about two years ago, we all noticed that the gap between diesel and gasoline was closing.  About a month ago, diesel surpassed gasoline in price--by a few cents, true, but it was the first time we'd experienced that situation here in Panamá.

As a chemist, I do know the broad principles behind refining, but nothing more.  Since I'm a biochemist, I really never had any reason or interest in worrying about the different grades of crude oil.  I always assumed, thanks to the price differential here, that diesel was a lower "cut" from the refinery, never thinking through the better fuel efficiency.

So I was quite surprised when reading the other day that diesel is produced from light, sweet crude, the exact grade that is pushing oil prices up to record highs.  It certainly made the difference in prices understandable, although not the earlier gap.

But one way the Panamanian government earns its income is through fuel taxes.  Unlike the US, where the Federal tax, as we all now know, is 18.5 cents per gallon, the tax here in Panamá, according to an article in La Prensa earlier this week, is 60 cents per gallon, for gasoline.  Because of public transport and transport in general, which uses diesel, it may be that the taxes on diesel were considerably lower.  Now the gap may be closing due to the price of the crude going ballistic.

The same article reported a proposal that the government lift the 60 cent tax until the end of the year in order to alleviate the extraordinarily high burden placed on the average Panamanian. I've already mentioned that we've had one death here in the area, thanks to high fuel prices--an old man returning from work on his bicycle hit (by someone we know) and killed by a motorcycle.  the victim was riding his bike because he could no longer afford the money for gas.  That was back in November.

I'd be more in favor of it if the "average" Panamanian weren't driving a d____d SUV.  That seems to be the ego, status vehicle car for many of the relatively new middle class here in the province.

But does that apply to diesel?  The article just talked about prices of gasoline, as I recall.  One of the real problems with the Panamanian press is that the articles are not as well-written as is usual in the first-world press.  If an article in a US paper is misleading or vague, you can just about bet the farm that it's highly probable that's deliberate.  Here, it seems to be standard, and exasperating.  

Of course, you always have to deal with the fact that the government officials here can be vague and misleading, too, just like anywhere else in the world.

Update:  According to La Prensa, diesel has reached a historic increase in price, going up today 39 cents per gallon.  91 octane gasoline will go up by 20 cents, 95 octane by 13 cents.  That means that given the lowest price I've seen around here for diesel has been $4.09, we'll be paying a minimum of $4.48.

The government also is not going to subsidize diesel more than it already has for transport, at least not immediately.  The government subsidizes (doesn't say how or by how much) 2.6 million gallons of diesel per month.  Ye gods, that's a HUGE amount!  The "red devil" buses alone use 1 million gallons per month.  The government says it wants to see what happens to prices in the next few months before deciding if more steps need to be taken.

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