Price of LPG to go up 15 percent

Increased freight costs following consecutive fuel price adjustments have begun to impact the liquefied petroleum gas distribution industry on Saipan, with major players disclosing plans to increase prices by up to 15 percent very soon.

By May 1, Saipan Industrial Gas Inc. will implement price increases that will peg the price of 90-lb. LPG’s at $79 each at delivery rate, higher by $4 than the current price of $75. The company will also adjust prices of other LPG products, including those in 20-lb. and 40-lb. tanks.

Its competitor, Wushin Corp., also plans to take on price adjustments. Wushin’s retail arm, DL Corp., disclosed that the parent company had already received a notice from its Guam supplier, South Pacific Petroleum Corp., about increased freight costs.

Saipan Industrial Gas Inc. general manager Dionisio Lopez said that higher freight costs have pushed up the Shell Marianas’ LPG prices. Lopez said his company decided to increase household prices of LPG on Saipan to cushion the impact of Shell’s price adjustment.

Lopez recently received a letter from Shell, which claimed that freight rate increased by $160 per metric ton.

“The product add-on amount of $505.37 per metric ton has been maintained since the start of the LPG distribution contract in 1993. The increases in freight cost in the past years has compelled us to review and consequently adjust the PAO amount,” said Shell North Pacific Cluster general manager Ruben Mario A. Domingo, in a letter to Lopez.

“In 2005 alone, the freight rate will increase by $160 per metric ton. The new rate takes effect…[on March 15, 2005] and will be valid until March 14, 2006. We are therefore adjusting the PAO to $665.37 per metric ton effective April 15, 2005,” Domingo told Lopez.

Saipan Industrial Gas’ new household prices for a 90-lb. LPG will increase from $75 to $79 and from $72 to $75 for delivery and pickup rates, respectively.

For 40-lb. LPG’s, the prices will increase by $6 per tank. Beginning May 1, delivery rate will become $45, while pickup rate will increase to $42. The new prices for 20-lb. LPG’s will increase by $2 and will become $25 and $22.

Lopez projected that the average price of a 90-lb. LPG would be $77 this year, higher than the 2004 average price of $70. He noted, though, that the LPG industry on the island has been very competitive, noting that prices used to soar to as high as $120 per cylinder.

When his company joined the Saipan market in 1984, Saipan Industrial Gas offered LPG at a lower price of $100 per 90-lb. cylinder. Competition in the market reduced prices to as low as $63 per cylinder, the average price in 2000. The average price increased to $66 and $70 in 2003 and 2004.

Earlier this year, Wushin disclosed their prices at $75 per 90-lb. cylinder; and $44 and $20 for 50-lb. and 20-lb. cylinders, respectively. The company has to announce when new prices will be implemented.