October 31, 2020

Ecuador will apply in July a new system to fix gasoline prices

The Government of Ecuador announced this Tuesday that on July 11 the new gasoline pricing system will be inaugurated, based on a “mobile band” mechanism that will allow the monthly value of fuels to vary by up to 5 percent .

With this system, the Government of Ecuador seeks to progressively reduce the subsidy or state aid that it has fixed for decades on gasoline, and which allowed it to lower its costs for the population.

The Ministry of Energy, in a statement, stated that on July 11 the new pricing mechanism will govern, which, thanks to the so-called “technical mechanism for mobile band policy,” will allow the value to be increased or reduced by up to 5 per monthly cent.

On the 11th of each month, the state oil company Petroecuador and the Agency for Regulation and Control of Energy and Non-Renewable Resources will announce the price of “extra” (regular), “eco-country” (ecological) and diesel, is added in the release.

The new fuel commercialization system was established by an Executive decree, signed by the Ecuadorian president, Lenín Moreno, on May 19.

Petroecuador designed the appropriate methodology and technical calculation for the implementation of the “mobile band” policy for fuel prices, the energy ministry said.

This “mobile band” model establishes “a minimum and a ceiling on fuel prices” and calculations will be made each month based on commercial costs.

The goal is that on the 11th of each month the new fuel prices will be shown in each of the country’s public and private service stations, the ministry added.

This model of fuel trade will allow that, in the future, “the price of oil derivatives will not skyrocket due to drastic increases in the price of a barrel of crude oil,” in the international market, the source said.

Currently, the price in Ecuador remains at $ 1.75 for each gallon (4 liters) of “extra” or “eco-country” gasoline, while that of diesel is $ 1 per gallon.

These prices will serve as the basis for setting the new retail prices, which will take effect from July 11 to August 10, when the monthly adjustment will be made.

The Ministry of Energy recalled that the price of liquefied petroleum gas, for mass consumption, will remain frozen.

The new Agency for Regulation and Control of Energy and Non-Renewable Resources will be the entity in charge of carrying out the control, in order to comply with the application of the band system in fuel suppliers and marketers nationwide, added the portfolio of Energy.

According to the Government, this fuel price mechanism “stimulates the economic and productive revival process promoted by the national government, in accordance with the current legal framework.”

However, for some trade union and social organizations in the country, the new system will mean the elimination of the fuel subsidy policy that has been applied for decades.

The alleged elimination of fuel subsidies has already generated violent protests in October last year, the same ones that ended when the government backed down on that measure.

According to some union leaders, who have threatened to call protests, with the new pricing system based on the “mobile gang” mechanism, the price of gasoline could rise by up to 60 percent in the next twelve months and It could generate a domino effect on the inflation index.


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