Antigua Raises Fuel Prices as Middle East Conflict Drives Oil Market Volatility

• Antigua and Barbuda is set to increase fuel prices as prolonged conflict between the United States (U.S.) and Iran drives renewed volatility in global petroleum markets. Prime Minister Gaston Browne said the government could no longer sustain the fuel subsidies that had been in place for several months as international energy costs increased.
• Nevertheless, the government opted for a smaller-than-expected increase to limit the impact on consumers, with officials initially estimating that pump prices could rise by around EC$3.50 (US$1.30). Instead, the increase was capped at EC$2.00 (US$0.74) per gallon across the board. Gasoline prices are expected to rise from EC$14.50 to EC$16.50 per gallon, while diesel prices will increase from their current level to EC$16.25 per gallon. Despite the adjustment, Browne said Antigua and Barbuda’s fuel prices would remain below those of several other Caribbean countries.
• The higher fuel costs are also putting pressure on government finances, as the administration has been subsidising fuel while foregoing tax revenues from West Indies Oil Company (WIOC). Browne said the government would normally collect EC$3Mn–EC$4Mn monthly from WIOC but instead accumulated an estimated EC$24Mn in foregone revenues over six months and now owes the company EC$15Mn.
• The price adjustment also comes amid a dispute with gas station operators, who temporarily closed some facilities over demands for higher profit margins. Operators have argued that the 8% margin on fuel sales, largely unchanged since the early 1990s, no longer adequately covers rising costs such as wages, electricity, insurance and maintenance. The shutdowns add another layer of pressure to the fuel market.
• The government’s decision to absorb part of the increase in global oil prices is likely to complicate efforts to rebuild fiscal buffers and reduce public debt. While limiting the pump-price increase to EC$2 per gallon provides some protection to consumers and economic activity, it also comes at a time when public debt remains elevated at an estimated 68% of GDP, with unresolved arrears and high gross financing needs already posing challenges to debt sustainability. A more prolonged oil-price shock could therefore place further pressure on fiscal consolidation while weighing on growth through higher energy and transportation costs.

(Sources: Trinidad Express & NCBCM Research)