SPC: Working Smarter to Save on Petroleum Costs

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Suva, Fiji – While renewable energy initiatives are popular worldwide and regionally, for Pacific Island countries and territories, the reality is that fossil fuel is still essential for meeting energy needs.

For the region’s experts, this requires coming to grips with issues such as pricing mechanisms, says Solomone Fifita, the Deputy Director (Energy) of the Economic Development Division of the Secretariat of the Pacific Community (SPC).

Mr Fifita said that while there is a place for renewable energy schemes within the Pacific region, there is often reluctance to fund events that prioritise fossil fuels despite the potential to make immediate and significant savings by discussing how to consolidate fuel needs into a national tender, choose high-quality clean fossil fuel and use fossil fuels more economically.

­­­­­‘We need to acknowledge that Pacific Island countries and territories depend on petroleum to keep functioning and will continue to do so until there is large-scale transformation of transportation and power generation’ said Mr Fifita.  

[The SPC Transport Programme’s ISPS compliance audit team, shown here in Papua New Guinea, has audited most ports in Pacific Island countries]

Across the Pacific, governments spend huge amounts on importing petroleum products. As a percentage of total merchandise imports, the bill for fuel in 2010 ranged from around 16 per cent of imports in New Caledonia, 18 per cent in Samoa and Vanuatu and 23 per cent in Tonga.

But it is Fiji that bears the brunt with the largest fuel import costs in the region. In 2010, the country spent 32 per cent of the value of all its merchandise imports on bringing in petroleum products. Trade figures from the Fiji Bureau of Statistics for November 2011 show mineral products accounted for 33.3 per cent of imports that month. Of this, diesel contributed 20.1 per cent, aviation turbine fuel 7.6 per cent, and light oils and preparations 3.5 per cent.

The 40.8 per cent increase in the cost of imported petroleum products between November 2010 and November 2011 reflects both an increase in litres imported as well as rising prices, demonstrating the dominant role petroleum plays in the country’s imported commodities.

Although over the course of a year, fuel market prices may fluctuate from quarter to quarter, reflecting the cost to suppliers, imports of all petroleum products into Fiji, other than aviation fuel, have seen an annual price increase.

The Pacific’s dependence on fossil fuel is exacerbated by the distances between island countries and reluctance in some quarters to share pricing information and formulas. But another aspect that could help alleviate the increasing costs of importing fuel is regional standardisation of fuel products, said Mr Fifita.

He said there was a need for countries to exchange information on their experiences and pricing formulas to ensure a united front when negotiating fuel prices, which could translate into savings for all.

‘The time to discuss strategy is when prices are low, not when we are under pressure to find an answer,’ said Mr Fifita.

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Value of Fiji’s major imports in 2010 and 2011 showing dominance of mineral products, which include petroleum products. (Graph courtesy of Statistical News, Fiji Bureau of Statistics July 2012).