New Petroleum Prices for January – February 2012

The Competent Authority has approved the new petroleum prices for January – February 2012 to be effective from Monday 16^th January 2012 and therefore wish to notify the public accordingly.

 Retail price for petrol product have increased and prices for diesel and kerosene have decreased compared to the prices of December 2011-January 2012. The retail price for January – February 2012 for Petrol have slightly increased by 1.32 seniti/litre to $2.71 per litre (equivalent to 0.49% increase). Kerosene have slightly decreased by 5.89 seniti/litre to $2.23 per litre (equivalent to -2.57% reductions) and Diesel have slightly decreased by 4.94 seniti to $2.87 per litre (equivalent to -1.69% reductions). The wholesale price for Diesel for Power decreased by -4.93 seniti/litre to $2.00 per litre (equivalent to 2.39% reduction).

Petroleum prices for January-February 2012 are mainly determined by the movement of FOB prices in the Singapore market based on December 2011 average prices of the daily published Means of Platt’s Singapore (MOPS) benchmark prices. The slight increase in the price of petrol and the slight decrease in the price of diesel and kerosene for January – February 2012 is attributed to the following reasons:

• The stronger demand seen through upward pressure on the diesel price in November eased in December and the continued concerns about the global economy (especially the impact of the European debt crisis) is keeping a lid on prices.
• OPEC discipline (a new production target including Iraq was announced during December) and geopolitical tensions continue to provide a floor to crude prices keeping them above US$100/bbl. Crude prices have now been above $100/bbl longer than they were in 2008 (although the peak has been lower). By month end concern over the rising tension between Iran and the United States and Europe, especially the possibility of a boycott of Iranian crude, saw the market starting to rise again.
• The support and pressure on middle distillate prices (jet fuel and diesel) eased in December. A warm start to the Northern Hemisphere winter and refineries returning to full production after planned and unplanned maintenance meant supply concerns were eased. As a result jet fuel and diesel prices fell relative to the crude price with a reduction in the refining margin.
• Conversely petrol prices, which had been very weak, rose relative to crude. There was some pick-up in demand although the rise primarily reflected unsustainable low refinery margins in November. Refinery margins for petrol remain quite low especially relative to earlier in the year.
• The Tongan Pa’anga continued to ease against the US dollar with the average rate between 0.5-1.0% down on November (which was down a similar amount from October). The exchange rate is weaker than earlier in the year which is why prices in Tonga are not as low as they were earlier in the year despite similar international prices. The freight market continues to remain steady at the fairly low levels it has been for most of the year.

 The overall impact of the market changes on Tongan prices is different for different products. While petrol is up by 1.3 seniti/litre it remains well down on October following the 10 seniti/litre drop last month. Jet fuel drops by 5.9 seniti/litre offsetting much of last month’s price. Diesel is down 4.9 seniti/litre which has offset about half last month’s price rise (all changes including consumption tax).

Ministry of Labour, Commerce and Industries

15 January 2012