Panama's gas woes

travel

High gas prices prompt Colon strike, government concessions

by Eric Jackson, mostly from other media

As March turned to April the world price of crude oil was at record highs, around $57 per barrel depending on its quality, and it was affecting and distorting the entire Panamanian economy. By April 5 it had crept up toward $60 and gasoline prices at the pump were headed toward $3 per gallon

Fuel prices here are more or less unregulated by the government, the major exceptions to that being the component of the price at the pump that reflects taxes, weak anti-monopoly laws that have from time to time been invoked against practices of fuel wholesalers and public ownership of shares in certain of the nation's energy-related businesses. The constitutional trump card, which still can't beat the global market, is the government's power to control prices by law.

Government price controls do exist when it comes to bus and taxi fares, 25-gallon tanks of cooking gas, electricity rates and certain basic food staples whose production and transportation costs include energy components. In a country where $400 a month is considered a good middle class salary, increases in prices of these things can and have in the past provoked rioting in the streets.

Buses and taxis are for the most part owner operated, and with higher fuel prices and government controlled fares their drivers have borne the brunt of the economic pressure caused by high world oil prices. As could have been expected breaking point of sorts was reached and the militant protagonists came from those sectors.

The Torrijos administration has been principally represented in its efforts to calm the situation by Government and Justice Minister Héctor Alemán, who has had few solutions to offer. An experiment in converting a few taxis to cheaper natural gas was tried by the government and the SINCOTAPE cabbies' syndicate, but the conversion kits cost $350 and mixed results were reported. April 4 negotiations between Alemán and the bus drivers' National Chamber of Transportation (CANATRA) resulted in an impasse, with the government offering no relief and the organization demanding bus fare increases and issuing an ultimatum with a three-day deadline.

The government was moved to announce a temporary reduction of the taxes on a gallon of gasoline from 60¢ to 20¢, and on a gallon of diesel from a quarter to a dime, on the following day. Thus CANATRA's deadline came and went without incident.

The government called on the fuel companies to take action to reduce prices further to augment the effect of its tax reduction, but this call was completely ineffective as the companies said that their prices merely respond to world market trends over which they have no control.

Despite the avoidance of a national confrontation Colon's bus drivers went on strike on April 12, immediately paralyzing much of the province's economy. The added irritant there was that prices in that Atlantic side province were higher than in the capital and the gas station chains, taking a cue from successive national governments, showed a marked inclination to ignore the grievances of its predominantly black population.

Once the strike got underway truck drivers, also generally owner-operators under pressure from high fuel prices, respected the bus drivers' picket lines and most movement of merchandise into and out of the Colon Free Zone ground to a halt. But most disruptive of all, the provincial bus syndicates blocked access and egress to and from the nation's only oil refinery near Cativa, a blockade that if maintained would have brought traffic to a complete nationwide standstill within a matter of days.

President Torrijos stepped in to mediate and the government and the gas station chains settled within 18 hours, declaring that prices at the pump would be rolled back to those prevailing in Panama City and thus convincing the bus drivers to end their strike and blockades. For their part Shell, Texaco, Esso, Delta and ACCEL won a government promise not to regulate fuel prices as part of the bargain. But the government also decreed changes in licensing laws that will allow companies that had only been allowed to sell fuel to ships to move into the terrestrial gasoline and diesel markets and allow other national and international companies to move onto turf that the five companies had previously divided among themselves.

As the petroleum producers show little inclination to lower world prices, and because Panama has no oil of its own, the measures that the Torrijos administration took to avert a national shutdown appear to be temporary palliatives rather than a long-term energy policy. What's most likely to happen in the long run is that Panamanian consumers will change their habits and seek substitutes for petroleum, and that as energy policies set by OPEC and in Washington and London come under indirect but potentially effective challenges from places like China, Brazil and Europe such substitutes will become available to Panama on the international market.

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