THE Ministry of Labour, Commerce & Industries has placed to the Competent Authority the new petroleum prices to be effective from today 16th March 2011 and therefore wish to notify the public accordingly to be fully aware of the implications and the reasons why.

Retail price for all products are proposed to increase significantly for the next month from today 16th March 2011. The retail price for March-April 2011 for kerosene leads the increase by 15 seniti per litre (7.2%), followed by Diesel at 14 seniti per litre (5.1%) and Petrol have increased by 8 seniti per litre (2.9%). It is important for the public to understand the upcoming increase in petroleum prices, the reasons behind the increase and also Government's interventions to mitigate its implication to the economy and the daily livelihood of the people of the Kingdom.

The rise in global petroleum prices influenced by the political unrest in certain producing countries means Tonga's prices will increase for the sixth month in a row and using October 2010 as the base month, this increase will be the strongest at 16 percent. Petroleum prices are mainly determined by the movement of FOB prices in the Singapore market based on February 2011 average prices of the daily published Means of Platts Singapore (MOPS) benchmark prices. The significant increase in March-April 2011 price is attributed to the following reasons:

• Political unrest in supplying countries including Libya as a significant oil exporter, pushed prices up by around US$10/bbl to US$ 15/bbl.
• In consequence, increase in crude prices rose by about US$13-US$14/bbl during February 2011;
• Increase petroleum demand especially from Asian developed countries like China continuing to grow (estimated to increase by 12 percent from 2009) has resulted in an increasing fuel prices driving the crude price higher
• Freight market has weakened a little but offset by the high cost of products in the market
• The value of Tongan Pa`anga against US dollar was relatively constant, therefore having no impact on the price change.

At the moment, the Ministry of Labour, Commerce and Industries is currently undertaking the annual review of the petroleum pricing template involving the two supplying companies to Tonga, TOTAL and Pacific Energy and the Retailers in Tonga to minimizes errors in petroleum price calculation passed to consumers of the Kingdom.

The outcome of this review is expected to be translated to the new price template for the calculating the retail prices by April 2011 to be effective from May 2011.

Equally important, Government's established Tonga Energy Roadmap (TERM) implementation also schedules interventions to assist Government increase the level of scrutiny of the costs that feed into prices, and affect the long term trend of petroleum prices & supply efficiencies, adjust pricing templates and where necessary, adjust regulatory arrangements to drive efficiency in the regulation of petroleum prices. Other TERM commitments also rolls out activities to be implement to improve energy efficient options for the economy and the livelihood of the people of the Kingdom. - Ministry of Labour, Commerce and Industries, 11/03/11.