Oil Prices are
falling but gasoline prices at the pumps and electricity prices are not following suit in Jamaica. Why? Why is gas and electricity prices in Jamaica still high? The simple explanation is that of the exchange rate. Jamaican to US dollar exchange rate has been on a steady and continuous upward trend as the chart shows in the graphic below. If it were not for the exchange rate the gas and electricity prices might have fallen at relatively the same rate as world oil prices.
But should anyone wish to try to understand the connection between oil prices and the cost of gas or electricity in Jamaica the information in the chart above may help alongside the explanation below. So, first there is the world oil price. This has to be bought with US dollars which continues to be more expensive on a daily basis thanks to the devaluing Jamaican dollar. The Jamaican dollar value of oil as a result has been increasing exponentially (See the chart highlighted in blue with the black line). This crude oil is then broken down into its various components by the refinery. Some is used for the gas to fuel cars some is used for fuel oil to generate electricity. The result of all this is the cost delivered to you by the gas station or the electricity supplier. The chart below show a comparison of the World oil price and the cost of gas in Jamaica and illustrates how the increase in the exchange rate has spread the correlating cost for both products.
While I would love the gas pumps and the electricity providers to reflect the same price reduction as seen in the world oil prices its clear that a devalued Jamaican dollar will keep prices up. Maybe Jamaican should lobby the Government to fix the exchange rate. Or maybe not.
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Jamaica - The Caribbean's most Valuable Property
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Oil price and exchange rate relation to energy cost in Jamaica. |
While I would love the gas pumps and the electricity providers to reflect the same price reduction as seen in the world oil prices its clear that a devalued Jamaican dollar will keep prices up. Maybe Jamaican should lobby the Government to fix the exchange rate. Or maybe not.
View other articles also from this blog.
Jamaica - The Caribbean's most Valuable Property
Exporting your way out of Poverty - Devaluing Jamaican Dollar makes me Wealthier Daily
Best of Jamaica Sport 2014
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