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The multi-million $ question: how to reduce the price of fuel

EditorialThe multi-million $ question: how to reduce the price of fuel

The burning of fossil fuels, the primary energy source of modern economies, became a concern of people around the globe some 50 plus years ago when scientists identified carbon emissions from vehicles as a major environmental pollutant and advised that we curtail its use. Heeding the advice of the scientists, governments in the industrial world began making demands on manufacturers to design engines that burned fuel more efficiently and emitted fewer toxic compounds into the atmosphere.

One way to reduce the consumption of fuel is by taxing it heavily. A few countries put a miniscule tax on fuel, but in many the tax is substantial, which serves to make people use less. “How Regressive Are Fuel Taxes? A Comparison of Countries from Around the World”, a 2011 report that was drawn from a book by Thomas Sterner and published in Resources, at the website resources.org, showed how high taxes on fuel leads to more efficient usage. Sterner stated that fuel taxes in the US were $0.19 per liter while the average in some Western European countries was $1.19 per liter, and offered that fact as an explanation for why “the average-per-capita consumption of gasoline in the United States is more than four times higher than in the United Kingdom or several other European countries.” In respect to world pollution from carbon emissions from vehicles, the Americans could be accused of being substantially more an environmental fiend than the Europeans are.

We must all try to minimize our carbon footprint, but it could be argued that in Belize we actually need to use more fuel, excuse our carbon emissions, so that we can grow our economy to a level where the basic needs of all our people are met. Probably the biggest constraint on our economic growth is the price of fuel, and it has been a promise of every political party in opposition, particularly the only two that can form the government in our present First-Past-The-Post two-party system, namely the PUP and the UDP, to bring down the price of fuel if they get the support from the people in the general elections.

The PUP had promised to lower fuel prices, as all opposition parties do, if they were elected to government in 2020, and not only have they not done so, but the price of fuel rose to unprecedented levels under their watch. Two and a half years after the party took the reins, the price of fuel is still high.

It’s possible, maybe likely, that the PUP would have moved to lower the price of fuel, but the PUP came to power when the Covid-19 pandemic was still at its worst, and shortly after, in February 2022, a war broke out in Europe. Both those events have severely impacted the world’s economy. Despite the harsh reality of the times, the UDP, in opposition, hollers, without offering credible solutions, about the high price of fuel. If they are taken to task about that, their likely response will be that the PUP, when in opposition, hollered just as loudly about them not keeping their promises to keep down the price of fuel.

When fuel from the Petro Caribe programme was flowing in full, the UDP promised to keep the price of regular fuel at or below $8 per gallon, and did not. Had citrus and farmed shrimp not continued their collapse, the UDP government could easily have kept its promise, because the Petro Caribe demanded only 40% of the payment for fuel up front, with the balance being paid over 25 years at the interest rate of only 1%. In February 2014, the Petro Caribe fuel was pouring in, but the SIB reported that the UDP government had premium gas at $10.93/gal., regular at $10.67/gal., and diesel at $10.39/gal. But in February 2015, at which time the UDP might have already been aiming to make 2015 an election year, the SIB reported premium gas selling at $7.42/gal., regular at $7.56/gal., and diesel at $6.98/gal. SIB data shows regular fuel in Belize in February 2016 at $7.78/gal; in Feb. 2017, $9.71/gal; Feb. 2018, $10.29/gal; Feb. 2019, $9.61/gal; and Feb. 2020, $9.90/gal; all years under the UDP.

The hollering about the high price of fuel is a disappointing story of ketl di kos pot. That is terrible in our country, which is desperately in need of serious, sincere discussion. Disgraced former Cabinet minister, John Saldivar, an economist, did make some suggestions in the first quarter of 2022—in a social media commentary. Mr. Saldivar proposed tweaks such as GoB considering “a ceiling for its tax intake from fuel”, reduction of the tax rate and/or a fixed flat tax, and the introduction of taxes that had “less widespread and crippling consequences.”

In July 2022 the GoB reported on what it had done to address the fuel situation during the worst of the epidemic. GoB said the acquisition cost of fuel had “increased more than 300% since November 2020”, and that to mitigate the situation it had fixed diesel and regular prices and dramatically reduced “import duties on such fuels.” GoB said that “at November 2020 and continuously for years before that, excise tax on diesel and regular gasoline was $2.97 and $3.29 per gallon, respectively” and that “those taxes have been reduced by virtually 100% and 77% respectively down to less than one cent and 75 cents per gallon.” GOoB said it had also started negotiating “for temporary reductions to certain importer and dealer margins”, and it had extended its fuel cost relief programs beyond sugar and banana producers, to include tourism and bus operators.

If the price of regular and diesel was brought to $8 per gallon, the productive sector – farmers, fisherfolk, bus and truck operators, road builders, and building contractors — would be extremely happy, because the cost of producing goods and services would go down. That would be an unquestioned plus for export-driven Belizeans in the productive sector, but at home fewer people would be able to buy their products, certainly in the short term. That’s because the government, if it didn’t/couldn’t make up the revenue shortfall through “other” taxes, would have to downsize, retrench employees.

Public employees who wouldn’t be affected mightn’t mind too much, but for a political party in office, retrenchment is poison. 1997 isn’t so long ago. That story actually begins with the 1989-93 PUP government which, after negotiations with the PSU, agreed to three consecutive wage increases of 8% for junior employees and 5% for senior employees. The PUP might argue that they had it all planned out, but it was the UDP that came to power in 1993. When the UDP looked at the third increase, which was due, it said impossible, unfeasible, and declared a freeze. In lieu of that increase, public employees were given shares in BTL.

The UDP government might have wanted to take back the previous two increases. Later in that government, in 1997, 800 public employees were retrenched, and in 1998 the PUP blew out the UDP at the polls. These political parties can be callous. If the UDP could force a day when the PUP put the guillotine to hundreds of government employees in one fell blow, which is likely if the PUP were to move to substantially reduce fuel prices, it would be a giant boost to the UDP’s chances at election time. Blaming the government for present high fuel prices also serves opposition interests, but not close to what a retrenchment or a wage cut could do for them.

Belizeans who want what is best for Belize, not what is best for the PUP or the UDP, want an intelligent, sober discussion. There are sincere people who believe the price of fuel must be forced downward substantially, that our economy won’t take off until fuel prices go down. The multi-million- dollar question is how to do it without causing great upheaval in the nation. Some have suggested we could save all our trouble by going after rich landowners and rich importing agents, which brings up another serious discussion, which we seem unable to have. That question is: why have we been unable to, or are unwilling to, bell those cats.

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