No motorists’ benefit from gas tax hedging

When the government of Jamaican imposed the specific excise tax on automotive fuels of J$7 per litre the motoring public were told that some of the tax would be used partially to hedge against future rise in oil prices on the world market above then current levels.
Motorist would be forgiven, if they felt that part of the funds collected and used to hedge against future sharp rise in the price of fuel, would also be used to cushion the price at the pumps that would jump as a result of upward price movement of oil. Based on information contained in the latest report from the International Monetary Fund (IMF) on their assessment of Jamaica’s performance under the extended fund facility, motorist seem unlikely to benefit from any easing at the pumps in the future, should the price jump back sharply on the world market for petroleum.
“Part of the proceeds from this tax package, have been allocated to an energy stabilization fund to both purchase a financial hedge against a future oil price increase and sponsor investments in climate-friendly energy projects. The authorities and staff concurred that it will be important to ensure a transparent design of the hedging instrument. Staff advised that the use of any resources from the financial hedge should be focused on mitigating the impact of higher oil prices on the poor and on enhancing fuel efficiency, rather than on stabilizing domestic fuel prices”, the IMF said.
The big question is whether any further hedging will be executed now that the price has slipped back into the low US$40 per barrel with the world flush with oil with technical indicators pointing to even lower prices ahead. In such a scenario, what will the levy of gasoline be used for?