Pressure is Put on the Cost of Living in Panama as Diesel Prices Soar 103%.

Diesel costs more than double what it did in January in Panama. The price per liter has risen from $0.76 to $1.54 for the adjustment that takes effect on October 30, a 103% increase that makes a key input for industry, transporting goods, distributing food, and operating agricultural machinery more expensive. 

Although the Government has allocated up to $100 million to partially subsidize fuel for certain sectors, it remains to be seen how much of that support translates into effective relief for consumers. 

The price trends published every two weeks by the National Energy Secretariat show a change in the relationship between fuels. In January, diesel cost less than 95 and 91 octane gasoline, but since the adjustment on July 24, it has remained more expensive than both, according to the price table. 

For the 2 week period beginning this Friday, diesel will rise two cents per liter, to $1.54, while 95 octane gasoline will drop to $1.32 and 91 octane gasoline to $1.19. 95-octane gasoline went from $0.84 in January to a high of $1.42 per liter in October. 

91-octane gasoline went from $0.78 in January to its peak of $1.32 in October, before the reduction that takes effect this Friday, October 30.  Fuel prices began to rise after February, when the conflict between the United States and Iran began.

Since then, with the Strait of Hormuz blocked to most oil tankers, the prices of crude oil and its derivatives have increased.  Starting this Friday, October 30, in Panama, 95 and 91-octane gasoline will decrease by nine cents per liter, while diesel will increase by two cents.

The rise in fuel prices coincides with pressures on the cost of living. In September, the consumer price index registered a year-on-year increase of 2.8%, while the transportation sector saw an 11.2% rise compared to the same month in 2015.

Within that sector, fuels and lubricants for private vehicles increased by 5.5% in September compared to August. These figures show that the rise in energy prices is accompanied by higher costs in other areas, although they do not allow us to attribute all the increases exclusively to diesel. 

To mitigate some of the impact, the Government approved a temporary fuel stabilization mechanism with resources of up to $100 million, aimed at activities such as public passenger transport, freight transport, agricultural machinery and artisanal fishing. 

As of October 1, the program had consumed $66 million, and the Ministry of Economy and Finance requested an additional $30 million to fund it through December.  The subsidy is targeted and does not constitute a general discount for all fuel buyers. 

During the recent budget discussion, the Ministry of Economy and Finance (MEF) acknowledged that it cannot guarantee that the subsidy will be directly reflected in lower food prices, because multiple factors are involved in their production and distribution. 

Furthermore, the breakdown of resources used by sector was not publicly disclosed during that appearance, which limits the possibility of assessing which activities have received the most support and how much impact the measure has had.