Dominican Government Weighs Targeting Fuel Subsidies as Global Prices Climb
The Dominican government is considering narrowing its fuel subsidies as refining costs rise. The weekly subsidy has averaged RD$1,500 million over the last 15 weeks.
Key points
- The weekly subsidy has averaged RD$1,500 million over the last 15 weeks.
- International diesel prices have risen 130.2% since January.
- The optimal diesel barrel rose from US$191.3 to US$209.2 between September and October.
The Dominican government is weighing whether to target its fuel subsidies toward specific products, economic sectors, or population groups. The move is under consideration because rising international prices are putting pressure on public finances. Industry and Commerce Minister Yayo Sanz Lovatón made the point at the forum "New Reality: The Dominican Republic Facing the Global Impact on Fuel," held Wednesday, November 4, at the Hotel El Embajador in Santo Domingo.
Sanz Lovatón explained that high refining costs, especially for diesel, are raising the amounts the government spends each week to keep international increases from fully reaching consumers. He said refined fuels have decoupled from the price of crude oil, which he attributed to international tensions and shifts in the energy market. As an example, he noted that between September and October the WTI barrel fell from US$94.6 to US$91.4 (-3.3%), while the optimal diesel barrel rose from US$191.3 to US$209.2 (+9.4%).
Sanz Lovatón broke down the components of this week's price of a gallon of optimal diesel. Import costs, including the product, freight, insurance, and port charges, come to RD$299.92, or 70.8% of the price. Taxes total RD$82.52 (19.5%), and margins for distributors, transporters, and gas stations total RD$45.23 (10.7%). A temperature adjustment of minus RD$4.20 also applies. The minister blamed pressure on the oil market on the conflict in the Middle East and cited international projections pointing to high prices through 2027, including a forecast of Brent near US$84 a barrel for that year.
Finance Minister Magín Díaz acknowledged that the international picture has grown more difficult this year. According to figures presented, since January diesel has risen 130.2%, gasoline 87%, and WTI 67.6%. Díaz said that since the week of March 7 the weekly subsidy has averaged RD$1,228 million, but over the last 15 weeks that average rose to RD$1,500 million, with weekly outlays between RD$970 million and RD$1,831 million.
Díaz said: "International uncertainty keeps us from knowing how long this crisis will last or what new pressures it will bring." The forum brought together officials, economists, business leaders, transport groups, lawmakers, and civil society.
Why it matters
If the government narrows the subsidies, fuel prices could affect people differently depending on the product and the sector. Those who depend on transportation to work and shop would be the most exposed to any change.