Govt to subsidise electric bills, cut pump prices as global oil spikes

The government will cover half of the expected increase in electricity fuel charges over the next three months to shield Barbadians from soaring global oil prices linked to the conflict involving the United States, Israel and Iran, said finance minister Ryan Straughn in the Budget.

Without state intervention, the average household electricity bill in April would be about $32 higher than in March, he said.

“The government is absorbing half of that difference, sixteen dollars, so that Barbadians do not feel the full impact of rising energy prices,” Straughn told the House of Assembly.

The subsidy, which takes effect on April 1, is expected to cost the treasury $7.9m over three months and will complement another measure already implemented by the government to stabilise electricity generation costs, he said.

Straughn revealed that the government had instructed the Barbados National Energy Company Limited (BNECL) to hedge fuel purchases in the futures market, locking in the price of heavy fuel oil—the main fuel used to generate electricity—at US$92 per barrel for the next three months.

The hedge is already generating savings, with benchmark Brent crude currently trading near US$106 per barrel, according to Straughn.

“That hedge is already saving Barbadian households and businesses approximately US$4 on every barrel of heavy fuel oil being imported for electricity generation,” Straughn said.

The hedge covers 240 000 barrels over three months, delivering estimated savings of about US$1m ($2m) compared with current prices.

“The hedge was done not as a gamble, but as insurance. It protects Barbadians against fuel spikes while the conflict continues,” he added.

The government is also acting to cushion motorists from the surge in global oil prices. The Minister announced that VAT on gasoline would remain capped at 47 cents per litre and diesel at 37 cents per litre until March 31, 2027, if global prices continued rising.

Straughn also announced that the excise tax on gasoline will be reduced from 99.39 cents to 89.39 cents per litre for three months, while diesel excise will fall from 44.03 cents to 34.03 cents per litre.

The BNECL will also lower the rate at which it recovers losses incurred in 2022 as a result of the Russia-Ukraine war, cutting the charge from nine cents to four cents per litre and thereby extending the repayment period.

The combined adjustments will reduce gasoline and diesel prices by about 15 cents per litre from April 1, Straughn said.

Government projections show that gasoline prices will remain below $4 per litre unless global oil prices exceed US$110 per barrel, though the finance minister warned that the situation remains highly uncertain.

“Regrettably, it is almost at US$106 today for Brent crude,” he noted, adding that authorities are monitoring the market closely and will activate further measures if prices rise significantly.

Looking ahead, he pledged that the government would work with Light & Power to introduce an off-peak electricity tariff for households, allowing consumers to benefit from lower rates during periods of reduced demand.

The system, already used by large manufacturers, would help balance electricity demand, reduce reliance on expensive peak-period power plants and ultimately lower energy costs for consumers, Straughn said.

“These measures only buy us time,” he said. “They are protection for the period of the crisis, and their effectiveness depends in part on how each of us changes how we use energy.”  (TD)