Costa Rica: Oil and Diesel Will Keep Subsidizing Gas

Concern over the serious impact on the productive sector of a 72% increase in gas prices has faded, while accusations of inefficiency and a monopolistic state oil company still persist.

Thursday, January 14, 2016

Although the ARESEP is expecting to submit to a public hearing the new pricing methodology which would eliminate the subsidy from the cost of Liquefied Petroleum Gas (LPG), asphalt and bunker fuel, and increase the cost of a 25 pound cylinder from ¢ 6,410 to ¢8,470, the Government of the Republic has decreed a new sector policy for prices, in order to avoid the increases proposed by the regulator.

Enrique Egloff, president of the Chamber of Industries of Costa Rica (ICRC), told that the measure "... preserves employment and retention of businesses in the country, and this puts the Costa Rican Oil Refinery to the test as it requires it to be more efficient. The oil refining company will have to assume variations in fuel costs that could arise from the policy of the Government and not pass them on to consumers. "

According to a statement by the Presidency "the aim is to establish the conditions for fixing the final price of those products, supporting competitiveness, by including a number of environmental, economic and social principles that must be taken into account when the ARESEP defines fuel prices in the country."

Under the new policy, "... the differences generated in the sales price at plants fixed by the ARESEP for these products will be transferred to the sales price at plants of the remaining products that Recope sells".

While the private sector welcomed the decision, concern about the disproportionate cost structure in Recope persists, because increases proposed by the ARESEP on bunker fuel and liquefied petroleum gas, doubly hit industrial companies in their attempts to be competitive and create jobs.

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