JGRA warns Petrojam diesel cap increase may raise transport and retail fuel costs

Fuel retailers are warning that Petrojam’s move to raise the weekly limit on diesel price changes could place new pressure on transportation, haulage and petrol station operators.

Petrojam announced that, effective the day of the report, the cap on diesel and ultra-low sulphur diesel price movements would go up. The Jamaica Gasoline Retailers Association said the adjustment nearly triples the weekly ceiling for diesel increases.

JGRA President Philip Chong said retailers accepted that the earlier cap was no longer sustainable and had anticipated some adjustment. He linked the need for a higher limit to shortages in regular diesel and ultra-low sulphur diesel, along with increased replacement costs.

However, Chong said the scale of the revised cap is significant and could quickly affect businesses that depend heavily on diesel. He said transport and haulage operators would likely review the added expense and may choose to recover it through the cost of moving goods, produce and other items.

The association also raised concerns for fuel retailers, noting that they buy fuel directly and will need far more working capital to keep stations stocked at the new price levels. Chong described the extra funding requirement as extremely high.

He said retailers’ margins are fixed in dollar terms and controlled by marketing companies. As diesel prices rise, he warned, those margins shrink as a percentage of sales, making it harder for some operators to manage their businesses.