Panic At The Pump

Photo: Corbis

Typhoon Katerina, which hit the Gulf states of the United States in August, was a human and economic catastrophe. It has exacerbated perhaps the largest threat to Pacific Island states, and indeed economies around the world, the impact of ever-increasing fuel prices.

And it has promoted Guam Attorney General Douglas Moylan and his counterpart in the Commonwealth of the Northern Marianas, Pamela Brown, to announce that they are participating in a United States-wide investigation of gasoline prices. The National Association of Attorneys General will look into obtaining documents and information about fuel prices.

Brown states "Every time the gas companies raise their prices, they issue the same cookie cutter press release stating the rise is due to increased demand from China and consumers are expected to accept this. The fact is we simply do not know enough about the exact nature of supply and reserves."

At press time, the price of diesel and premium-grade gasoline in Guam was over $3 per gallon, and almost $3.50 per gallon on Saipan.

It is a scenario being repeated through the region. In French Polynesia, President Oscar Temaru's Council of Ministers hiked the price of fuel by 15 French Pacific francs per liter to 143 F CFP (US$1.54) per liter of unleaded petrol. It was the first change in fuel prices on Tahiti since May 1, 2004.

Samoa's finance minister, Misa Telefoni Retzlaff, released a statement saying "as long as the world continues to consume oil at the increasing rates we have over the past two years, especially with China emerging as a huge industrial power, we must be prepared to see prices sustained at a very high level. These forces are beyond the control of governments everywhere."

And in the Solomon Islands, John Roughan of the Solomon Islands Development Programme observed, "The Solomons yearly import of energy-petrol, diesel, kerosene, oil-is over SI$90 million (US$11.9 million) with only food imports topping the fuel bill ...We can't afford such a drain on our small cash base. Of course now we sadly dish out more and more of our few dollars to pay for less and less fuel, thinking that we have no alternative."

Airlines have been talking about the impact of fuel rises on their operations for more than a year. This has translated to increased fuel surcharges by Air Niugini, Air Pacific, Air New Zealand and a raft of other airlines.

The Horizon Lines shipping company in the U.S. filed for an emergency 2.5 percent fuel surcharge to take effect on Sept. 15, on top of an 11.5 percent fuel surcharge imposed incrementally by Horizon during the past two years. Other shipping companies, including Matson Navigation, were likely to follow.

Other industries have included the fuel situation into their profit and loss projections. The operations of Fiji gold miner, Emperor Mines Ltd. are now under review, after it listed a AUD$33.7 million (US$25.8 million) net loss for the year ended 30 June, compared to a loss of AUD$4.9 million (US$3.7 million) in the previous fiscal year. Emperor cited high fuel prices as one of the operation problems leading to this result.

There is more to come. The Guam Power Authority has asked the territory's Public Utilities Commission for a 9 percent to 11 percent rate increase, the second major hike in the past four months.

That has led to increased discussion about the need to find alternatives such as coconut fuel. Business, power utility and government officials met to discuss biofuel development in Vanuatu in early August, focusing on the challenges the private sector faces in developing a widespread and viable biofuels industry. National action plans are now being developed as a result of that meeting.

In French Polynesia one company, Technopro, unveiled a biodiesel fuel-making machine that uses copra oil at the Biofenua stand at the recent Agricultural Fair held on the island of Tahiti. Peter Sharp of Rabaul Shipping Company in Papua New Guinea says PNG could save K100 million (US$32.1 million) in foreign exchange from imported diesel if copra output was processed into coconut oil and used as a diesel fuel replacement.

And at the recent Melanesian Spearhead Group Meeting in Goroka, Papua New Guinea offered MSG members first option on surplus refined oil products from the Napa Napa oil refinery in Port Moresby. Trade and Industry Minister Paul Tiensten told his counterparts.

"I would rather see that the surplus production (of 17,000 barrels) being shared among our wantok MSG countries so that we can leverage our overall trade within the region.

Most of the fuel products in the region are imported from Singapore. The Asian Development Bank says with an increase of world crude of nearly 75 percent since the start of this year, "in net oil-importing countries (which include all Pacific Island states bar Papua New Guinea) rising oil prices will squeeze income and demand, present an inflationary threat, and have fiscal consequences."