The Excise Tax on Diesel fuel is now at $3.78 per (Imperial) gallon, Statutory Instrument No. 73 or 2023 informed recently.
As of June 14th, the new rate per gallon is up 4.4% from where it was set in March this year via S.I. No. 34 of 2023, when it was $3.62.
The per-unit-tax rate is part of the government’s ongoing fuel-price stabilization initiative designed to minimize fluctuations in pump prices, especially in the face of international oil-price shocks such as the one experienced last year following the start of the Russia-Ukraine war.
West Texas Intermediate (WTI) shows that prices started to climb immediately following the start of the war, with oil prices peaking at just about US$115 per barrel last June. Currently, WTI sets crude prices at roughly US$72, approximately a 40% reduction.
For context, last June, the pump price for Diesel was $13.41, a fixed price that ran from March 2022 to October 2022. For June 2022, it must be recalled that the “Landed Cost”—the amount it takes to purchase and get the fuel product into the country—was $8.49, a figure that represented 63% of the final price for Diesel.
Records show that the “Landed Cost” for Diesel climbed to a maximum of $10.12 between late June and mid-July 2022, then representing 75% of the fixed pump price of $13.41.
At that time, as The Reporter had previously covered, as part of the stabilization program, the Excise duty on Diesel fell to as low as $0.01, a rate significantly below its pre-COVID levels of $3.57 that was set in 2017.
Ministry of Finance data informs that as of late May, the “Landed Cost” for Diesel is roughly $5.47, a figure that is both 47% of the current pump price and 46% below last year’s maximum.
At $11.55 per gallon, government taxes, which last June accounted for 12% of the final price paid by consumers, now represent 40% of the pump price for Diesel.
Revenues and Stabilization Program
The new excise rate of $3.78 is marginally above the pre-COVID rate of $3.57—roughly only a $0.21 difference. The latter fact implies the government has just returned to a position in which it can expect to begin to recover revenues it had forgone for Diesel.
The Reporter spoke with Hon. Christopher Coye, the minister of state in the Ministry of Finance, earlier this year about the ongoing fuel-price stabilization program.
In January, Coye had explained, “GOB has accumulated near $30mn in excise duty losses over the life of the program to date. ... There is no recovery currently being made from diesel since the excise duty on diesel is only just back to where it was at pre-war in Ukraine. Diesel prices remain elevated relative to gasoline prices.”
As long as the excise duty remained below its original rate ($3.57), the government would have been making relative
shortfalls. According to S.I. No. 22 or 2023, the February duty was set at $2.44 per (Imperial) gallon. The rate was later changed to $3.62 at the start of April 2023 and as of June 13th to $3.78.
Having only returned to and above its original rate of $3.57 for only three months, it is likely that very little forgone revenues have been recovered by the government as it pertains to this fuel product.
The Reporter had then also asked the minister how long he foresees the fuel-price stabilization program continuing.
“I cannot say really because there are a lot of variables in play that we don’t control,” he replied, adding, “Acquisition costs are highly volatile and impossible to predict. The likelihood of further shocks remains significant. In addition, we would like to recover the losses but it can’t be unduly burdensome on the taxpayer or consumer at the same time having regard to the inflationary environment. Any recovery would, therefore, have to be approached in a moderated or modest manner.”
The volatility in the international market continues to be a concern, with the recent announcement by the members of the Organization of Petroleum Exporting Countries (OPEC) Plus (OPEC+) that they will extend production cuts by roughly 2 million barrels per day only adding to that uncertainty. This is further augmented by Saudi Arabia’s decision to further cut down on its supply. Both announcements have led energy agencies to project slightly higher oil prices for 2023, a likelihood that could potentially impact the “Landed Costs” of fuel products in Belize.
The minister also opined that the program has become more about the stabilization of government revenues than about price stabilization. “As acquisition costs have been coming down, we keep reducing the pump price whilst also trying to make some recovery on revenue losses,” he explained.