Here, Everywhere, Fuel Prices Continue to Rise

November 16, 2007

A perfect storm of political, economic and technical hitches is pushing fuel prices up worldwide, and Costa Rica has gotten no reprieve. Gasoline prices have more than doubled here since 2003, and diesel has tripled.

Last Friday prices went up again, and that same day, the National Oil Refinery (RECOPE) requested yet another price hike that if approved would boost diesel to a record level next month.

Yet as the price of fuel goes up, so does consumption and the number of people driving cars in Costa Rica. The National Insurance Institute (INS) confirmed that mandatory vehicle circulation permits, known as the marchamo, are up 7.13% this year.

There are almost 60,000 more cars on the roads, for a total of just under 890,000. Consumption is also at an all-time high, according to RECOPE’s numbers.

If RECOPE gets its way in this new price hike – which it likely will, since price increases are determined by a formula based the world oil market – the price of diesel fuel would become ¢511 ($0.98) per liter, or $3.70 per gallon.

The price of super and regular gasoline would go up to ¢570.2 ($1.10) and ¢554.8 ($1.07) per liter, respectively. In U.S. terms, that would be $4.16 per gallon for super and $4.05 per gallon for regular.

In a release, RECOPE blamed the price increases on a flurry of geopolitical factors, including the weakness of the U.S. dollar; the increase in world consumption of diesel fuel with the onset of cold weather; bottlenecks in the world’s refining capacity; and storms in the North Sea.

In addition, Mexico’s state oil company, Petróleos Mexicanos, shut down some of its production in the Gulf of Mexico after an accident, and the United States and Iran continue to rattle sabers at each other, jiggling oil prices even higher.

In the past few weeks, those prices have been approaching the $100-a-barrel mark. Costa Rica generally pays much more than that, since it imports the majority of its petroleum products pre-refined. RECOPE refines only about 30% of the products sold on the Costa Rican market.

Compared to the world’s developed countries, Costa Rica consumes a tiny amount of oil, only 16 million barrels last year, compared to about 30 million a day in the United States.

RECOPE spent $1.24 billion last year importing petroleum products, or about 5.8% of gross domestic product.

The amount of oil consumed by Costa Rica continues to increase along with the price.

From 2000 to 2005, Costa Rica’s consumption of petroleum products grew more than 25%, and so far this year, consumption has risen 9% compared to the same period in 2006.

“It’s normal because we’re in a time of economic expansion,” said José Ross, an engineer who directs the Costa Rican Foundation for Sustainable Development’s Mobil:e project that teaches Costa Rican drivers how to drive more efficiently.

“The bad thing is people don’t think about it,” he said. “People are ready to keep paying more. They don’t try to make any effort to lower consumption.”

Ross said Costa Rican habits like driving on congested bus routes and putting the car in neutral while driving tend to increase gas consumption. Ross suggested other techniques for saving money such as filling up vehicles at night when it’s cooler so fuel takes up less volume and timing a vehicle’s speed to arrive at a stoplight just as it turns green.

“The bad thing is that we have to export a lot to get dollars,” Ross said, “and those dollars we’re spending on fuel.”

 

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