According to the Regional Center for Sustainable Economic Policies (CREES), the DR has the second highest fuel prices in the Central American and Caribbean area. Only Costa Rica has higher fuel prices in the region. Prices were already high and then rose due to the Ukraine war. Yet, the government has kept a cap on the price over the past 13 months to restrain inflation.
During the past year or so, only Panama and the Dominican Republic have resorted to fuel subsidies to stabilize the cost of fuel sold to consumers. According to the latest information, the Dominican government has spent over RD$35 billion to maintain fuel prices at March 2022 levels.
According to the original decree, these subsidies should be effective when oil prices are over US$85 per barrel to US$115 a barrel. However, the Abinader administration has kept the subsidy going even when oil prices were way over US$115 a barrel and well below US$85 a barrel.
The CREES report details the reason: The Dominican government assesses an average 31% tax on every gallon of fuel that is sold in the country. According to the report, the crude oil of reference for the Dominican Republic is the West Texas Intermediate (WTI) whose price has varied between US$85 and US$75 over the past few months. But the big gorilla in the room is China and international energy sources are projecting a large increase in China’s oil imports for the coming year and this, combined with some cutbacks in production from the OPEC nations, forecasts a tense year.
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El Caribe
17 April 2023