14 August, 2012. The Competent Authority has approved the new petroleum prices for August-September 2012 to be effective from Thursday 16 August 2012 and therefore wish to notify the public accordingly.
Retail price for all products for August-September 2012 have significantly increased compared to the price for July-August 2012. The retail prices for August-September 2012 for Petrol have increased by 10.18 seniti to $2.70 per litre (equivalent to 3.9% increase) followed by Diesel by 7.90 seniti to $2.78 per litre (equivalent to 2.9% increase) and Kerosene increased by 7.82 seniti to $2.16 per litre (equivalent to 3.7% increase).
Petroleum prices for August-September 2012 are mainly determined by the movement of FOB prices in the Singapore market based on July 2012 average prices of the daily published Means of Platt's Singapore (MOPS) benchmark prices. Recommended wholesale prices have been calculated using the Tonga Fuel Price Template (TFPT) agreed and issued during the 2011 Annual Price Review.
The significant increase in the price for August-September 2012 is attributed to the following reasons:
- The July average price of Crude Oil (Dated Brent) was US$102/bbl, about 8 percent higher than the previous month.
- The current price rise is also driven by potential future disruptions in supply due to geopolitical issues. The US/Europe sanctions banning imports of Iranian crude came into force on 1st July. In response to the sanctions Iran threatened to close of the Strait of Hormuz, the only major route for ships to carry crude out of Middle East. Escalating geopolitical tensions in Syria which have potential to spread around other parts of the region also kept pressure on the crude oil market.
- Global oil supply outpaced demand by about 2 mn b/d in the first half of this year. This increase in crude output has not fully been used for refining into products as both Producers (Oil producing countries) and Consumers (Refinery) are stockpiling some of the crude to prepare for any disruptions in supply. Crude stockpiling has resulted in product stock levels in some of the main consuming countries falling to a four year low. The current price rise also reveals the supply constraints evident in product stock levels, in particular diesel.
- The mixed picture of recent developments in world oil demand has possibly become even more extreme during the past couple of months. While demand in Europe, particularly in Mediterranean countries, continues to weaken as the economic situation deteriorates it still appears to be holding up relatively well in the USA. In contrast, in Japan and South Korea, demand has recently been very strong versus a year earlier.
- The crude rise in July only partially offset the large decline in June. Product prices have followed a similar trend increasing in line with or above the crude price. Diesel and kerosene prices rose as strong regional demand and tight supplies due to refinery shutdowns helped boost margins. Regional petrol prices were supported by strong regional demand from Indonesia, Pakistan and Sri Lanka; the increase outpaced the crude increase.
- The Tongan Pa'anga was relatively steady against the US dollar so most of the increase in regional product prices is seen locally. The freight market also strengthened, resulting in an increase in the overall freight component in this month's prices.
There is a significant increase in the price of diesel, kerosene and petrol for August-September 2012 compared to July-August 2012 prices. The wholesale price for August-September 2012 for Petrol leads the increase by 10.19 seniti/litre (4.2%), followed by Diesel and Diesel for Power by 7.89 seniti/litre (3.1% & 4.3% respectively) and Kerosene increased by 7.82 seniti/litre (4.0%). All changes including consumption tax.
Ministry of Commerce, Tourism & Labour
14 August 2012.