Regulation may guard against immediate gas hikes due to the war in Iran, but BELCO says it ‘cannot fully shield customers from rising oil prices’
Bermudians may not see prices jump at the pump – yet.
Any impact on energy costs, however, will be known before the end of the month.
At the Pump…
As war rages on in the Middle East, sending oil prices surging, Jermaine Simons at RUBiS says the local impact may be moderated by several factors.
“Pump prices in Bermuda do not move in direct response to daily market fluctuations”, Mr Simons says, “as local fuel prices are regulated and typically reviewed on a periodic basis rather than daily.”
Additionally, the fuel Bermuda imports is already refined, and comes mainly from the U.S. Gulf Coast and Caribbean. Mr Simons says prices in this market are typically assessed over a 3-month reference period, which helps reduce the impact of sudden price spikes.
Mr Simons adds that Bermuda’s maximum retail pump prices are controlled by the Regulatory Authority, meaning any change will have to be carefully reviewed before hitting customers.
Meanwhile, Alcindor Bonamy, General Manager at SOL, says the hostilities in the Middle East are contributing to cost increases to the fuel supply chain into the Caribbean and Bermuda.
However, he adds that “while we are seeing increases in fuel prices and freight costs, we do not currently anticipate any disruption to product availability.”
Back in 2022, Premier and Finance Minister David Burt put a temporary freeze on gas and diesel prices as the war in Ukraine caused them to rise.
We reached out to Government to see if a similar move may be considered in the face of the war in Iran. We had not received a response by news time.
At the Plug…
BELCO says it is monitoring global fuel prices, as the war in Iran drives oil costs upward.
The monopoly electricity provider says it uses strategies to navigate price volatility, but it “cannot fully shield customers from rising oil prices.”
“The current unrest in the Middle East is pushing prices higher, and this will unfortunately continue to affect the cost of electricity in Bermuda.”
The Fuel Adjustment Rate (FAR) in everybody’s BELCO bill is amended quarterly by the Regulatory Authority, reflect any variation in imported fuel costs.
The next adjustment is due April 1st, and will be announced by the RA in late March.
READ comments from Rubis, SOL and BELCO below…
Jermaine Simons, RUBiS Energy Bermuda
Potential Impact of Rising Oil Prices on Fuel Costs in Bermuda
While global crude oil prices have recently risen above $100 per barrel, the impact on fuel prices at the pump in Bermuda would not necessarily be immediate and may be moderated by several factors.
Global Oil Prices and Refined Fuel Costs
Higher crude oil prices generally increase the cost of refined products such as gasoline and diesel, as refineries pay more for crude feedstock. However, pump prices in Bermuda do not move in direct response to daily market fluctuations, as local fuel prices are regulated and typically reviewed on a periodic basis rather than daily.
Bermuda Imports Refined Fuel
Bermuda imports finished fuels, primarily from the U.S. Gulf Coast and Caribbean region, with occasional liftings from the U.S. Eastern Seaboard. Local pricing is therefore influenced by refined product benchmark prices in the U.S. Gulf market. These benchmarks are typically assessed over a 3-month reference period, which helps smooth short-term volatility and reduce the impact of sudden price spikes.
Regulatory Framework
Unlike many jurisdictions, maximum retail pump prices in Bermuda are regulated by the Regulatory Authority. This framework means that any adjustments to fuel prices occur through an established review process rather than immediate reaction to changes in global markets. As a result, any potentially significant impact on retail fuel prices would generally occur over a period of months rather than days.
Summary
Bermudians are unlikely to see an immediate change at the pump before mid-March. Should global oil price benchmarks remain elevated for a sustained period, gradual adjustments could occur through the normal regulatory pricing mechanism. If the increase in oil prices proves temporary, the impact on local fuel prices may be minimal.
Alcindor Bonamy, General Manager, Sol (Sunoco)
“Hostilities in the Middle East are currently impacting both freight and fuel markets, contributing to cost increases across many global supply chains, including the fuel supply chain that supports reliable delivery of fuel products into the Caribbean, inclusive of Bermuda. While we are seeing increases in fuel prices and freight costs, we do not currently anticipate any disruption to product availability.”
BELCO spokesperson
“Each quarter, the Fuel Adjustment Rate is adjusted to reflect the actual cost of fuel for our customers. BELCO continues to monitor global fuel markets and uses disciplined strategies to minimise the impact of fuel costs. These strategies help manage price volatility but cannot fully shield customers from rising oil prices. The current unrest in the Middle East is pushing prices higher, and this will unfortunately continue to affect the cost of electricity in Bermuda. The next Fuel Adjustment Rate will be reviewed and set by the Regulatory Authority in late March, with changes taking effect on April 1st.”
