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Gas Proposal Stirs Debate

January 27, 2006

Gas station owners continue to object a proposed change to gas prices that would allow more competition among stations; they now threaten both legal and illegal protests if the proposal moves forward.

 

The Public Services Regulatory Authority (ARESEP) has proposed allowing gas stations to reduce their prices by a few colones per liter if they wish. Under the current system, all stations throughout the country charge the same for gas at a price set by ARESEP. For example, last week ARESEP approved a nationwide gas increase of up to 7%.

 

ARESEP planned to hold a public hearing Monday, Jan. 23, to discuss the plan, however, it was called off by the Constitutional Chamber of the Supreme Court (Sala IV) because of questions about whether the hearing was adequately advertised. The meeting was incorrectly advertised in a daily newspaper for Thursday, Jan. 23, according to the Costa Rican Association of Fuel Retailers (ACEC), which opposes the plan.

 

The proposal would allow gas stations to reduce their net earnings by 50% in order to offer lower prices. For example, gas stations currently earn ¢6.4 ($0.01) for every liter they sell. They would be allowed to lower this earning to ¢3.2 ($0.006) if they wish, the daily La Nación reported.While the difference to the consumer is only a handful of colones per liter, it adds up for large buyers. For example, a bus company which purchases 250,000 liters of diesel a month could save ¢800,000 ($1,600) a month, according to the daily.

 

Without going into details, ACEC announced last week they will take legal and illegal actions to stop the proposal. The association, which represents 280 of the country’s 320 gas stations, maintains the change will result in the death of small stations, allowing only large foreign gas companies to thrive.

 

Companies that transport gas also oppose the proposal, fearing they will be asked to reduce their transportation costs. ARESEP will not make a decision about the proposal until after a public hearing is held.

 

Gas prices increased this week to ¢457 ($0.96) for super, ¢436 ($0.87) for regular and ¢319 ($0.64) diesel, up from ¢422 ($0.85), ¢402 ($0.81), ¢303 ($0.61), respectively.

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