Government of the Federated States of Micronesia

Petroleum Corporation Announces Further Price Reductions

Kolonia, POHNPEI (FSM Petro Corp/FSM Information Service): December 9, 2008 - The Federated States of Micronesia Petroleum Corporation (FSMPC) has reduced the wholesale prices for kerosene, diesel and gasoline products across the three States effective today.

"This is our fourth price reduction in as many months and applies to commercial, retail and aviation customers. The reductions vary in each State but range between seventy and ninety cents a gallon. We have reduced prices significantly since July" says the Corporations Chairman Mr. William Hawley.

The price of oil products in the international market remained stable in November. At the November meeting of the Organization of Petroleum Exporting Countries (OPEC) in Cairo, its most powerful member, Saudi Arabia, announced what it believed to be a "fair" price for oil. OPEC did not cut crude output levels, but Riyadh's public comments about a specific oil price level were the first of their kind from the world's oil superpower for some time. Saudi Arabia's King Abdullah and oil minister Ali Naimi both said they thought a price of S$75/barrel - more than US$20/bbl higher than current levels - was a "fair" price, Naimi saying it was the kind of level which could guarantee continued investment in new capacity and therefore safeguard future supply.

"It is too early to say where international oil prices will stabilize. OPEC believes that a fair price for oil is US$75/bbl which is higher than what the world market is currently trading at. The thing we are certain of is that oil prices have the capacity to rise as fast as they fall. We are taking a cautious approach to our pricing policy because this Corporation is just five months old. If international prices stay this low we hope to pass on further savings in coming months" says Chairman Hawley.

International crude oil prices have stabilized between US$55 and US$60/bbl. The reference international trading market for refined oil products in the Asia Pacific region is Singapore and an independent data service - Platts Oilgram (platts.com) - collects and publishes the daily prices for oil product trades in the market. The Platts monthly average has reduced to around US$70/bbl from a July high of US$170/bbl.

Fuel is purchased by the Corporation under a Fuel Supply Agreement with Mobil Oil.

Products are purchased from Singapore refineries, shipped to Guam and then transshipped to the FSM by the MV Golden Micronesia, a local coastal tanker purpose built for fuel delivers in the northern Pacific.

"Our Supply Contract with Mobil uses an average of independently published Singapore prices. It is a transparent formula that is common in the Pacific and it ensures that our buy price is linked to an independent market reference. Because of distribution logistics, it takes time for it to translate into domestic prices. For example international prices through last month recorded the lowest international price in twelve months, but the Corporation did not buy any fuel until 31 November.

Depending on shipping logistics, this delay can be as much as two months" says Chairman Hawley.

The new prices will be effective 05th December 2008 and is expected to have a positive effect on all aspects of the FSM economy. The general public can therefore expect these savings to be passed through to various local goods and services over coming months.

For more information contact the FSMPC on +691 320 6364.