by Tommy Descartes
Despite the steady decline in international oil prices over the last two years, Saint Lucians have continued to pay one of the highest pump prices for fuel in the Eastern Caribbean. This isn’t just a question of fiscal policy, it’s a question of fairness, equity and the appropriate role of government during periods of economic stress. At the heart of the issue lies a petroleum pricing mechanism that has veered from its intended purpose: to pass through global oil price movements to consumers in a timely and transparent manner. Instead, it has morphed into a rigid, revenue-maximising tool, disproportionately affecting low-income households and dampening national consumption.
The global context vs domestic policy
Between 2022 and 2024, the global benchmark for crude oil – West Texas Intermediate – fell from an average of US$94.90 per barrel to US$76.60, representing a 19.3 per cent decrease. Similar declines were recorded in CIF (cost, insurance, freight) values for refined petroleum products. Yet, in Saint Lucia, domestic pump prices remained flat. Specifically, unleaded gasoline was fixed at EC$16.50 per imperial gallon from April 2023 to March 2025, while diesel was similarly capped beginning November 2023 through March 2025 at $16.50.This prolonged policy of price fixing stands in stark contrast to the practice in other OECS member states, which allowed for real-time adjustments aligned with international market fluctuations. The result is that Saint Lucians paid $0.92 and $0.94 more per gallon for gasoline and diesel from January 2023 to April 2025, relative to their OECS counterparts.
What does the final pump price say about the government’s priorities?
Upon closer examination, it becomes evident that three distinct fuel pricing policy approaches have been adopted across OECS member states. The first approach is a fixed low-price policy, as seen in Antigua and Barbuda. While this reflects a departure from the standard pass-through mechanism, it appears to be a deliberate attempt by the government to shield its population from elevated fuel costs. Though socially protective, such an approach carries fiscal risks by constraining government revenue in the face of rising import costs. The second approach involves a partial or full market-based pass-through mechanism, implemented by countries such as Dominica, Grenada, St Vincent and the Grenadines, and St Kitts and Nevis. These governments have generally adhered to the original intent of the fuel pricing framework by adjusting domestic prices downward in response to declines in international oil prices, thereby ensuring that consumers benefit from global market movements transparently and equitably. The third approach, adopted solely by Saint Lucia, represents a fixed high-price policy. Among the three, this policy stance is arguably the most regressive, as it maintains elevated fuel prices despite declining global oil prices, thereby placing a disproportionate financial burden on households and businesses and undermining the pass-through principle that the regional mechanism was designed to uphold.
Fuel dependence, volatility and vulnerability
Fuel imports account for a substantial share of Saint Lucia’s merchandise trade’ historically 16.9 per cent, ranking third behind food and machinery imports. However, during oil price spikes (e.g., 2008, 2012, 2022–2024), petroleum products topped the list of imports, highlighting just how exposed the country is to energy price volatility. More importantly, fuel is not a luxury; it is a ubiquitous input into nearly every sector of the economy, from transportation and agriculture to electricity generation and public services. Thus, when fuel prices remain artificially high, the cost reverberates across the entire economic structure. It increases input costs for small businesses, inflates food prices via logistics chains, and raises operating costs for public services. Over time, this dynamic becomes embedded in inflation expectations, prompting providers of core goods and services (insurance, rental, transport etc) to preemptively raise prices. The result is sustained upward pressure on core inflation, leading to structurally higher price levels and increasing the overall cost of living and doing business within the economy.
The inflation tax and its regressivity
Keeping fuel prices above market-clearing levels, especially during a global decline, constitutes what can be called a “de facto inflation tax”. This is particularly regressive: it disproportionately affects lower-income households, who spend a larger share of their income on energy and transport. Worse still, this fiscal approach erodes real incomes, reduces purchasing power, and suppresses aggregate demand at a time when economic recovery and household resilience are desperately needed. In essence, the policy appears designed to protect government revenue at the expense of consumer welfare. While fiscal prudence is necessary, especially in small, open economies with narrow tax bases, it must not come at the cost of deepening social inequities.
Regional contradiction and missed opportunities
What is most perplexing is the divergence between Saint Lucia’s policy and the broader regional framework. The Eastern Caribbean Central Bank (ECCB) promotes a pass-through pricing mechanism precisely to shield consumers from arbitrary government pricing while ensuring market responsiveness. Most OECS countries – Dominica, Grenada, St Kitts and Nevis – have adopted this model in spirit and practice. Saint Lucia’s deviation raises important questions: is this an ideological choice, a revenue imperative, or a structural failure?
Moreover, in an era where climate vulnerability, energy resilience and inclusive growth dominate the regional discourse, this pricing policy feels regressive. It neither encourages energy efficiency nor accelerates the transition to renewable alternatives. It simply locks citizens into bearing the full brunt of inefficient and opaque pricing.
Transparency and reform
The case for reform is compelling. First, transparency in the fuel price build-up must be institutionalised. Citizens should understand how international prices, CIF costs, taxes, and profit margins factor in what they pay at the pump, given that petroleum is price-controlled by the government. Second, a flexible and rules-based fuel pricing mechanism should be legislated to prevent ad hoc policy shifts and political manipulation. Third, the government should consider using price smoothing or hedging instruments to balance fiscal and consumer needs during volatile periods.
In parallel, a portion of fuel tax revenue could be ringfenced for targeted social transfers or transportation subsidies for vulnerable groups. This would ensure that government does not simply benefit from windfall revenue while low-income families bear the inflationary burden.
What alternative policy options could have been embarked upon?
If cushioning fuel prices for consumers had been the government’s foremost priority, Saint Lucia could have adopted a similar policy stance to that of Antigua and Barbuda by maintaining fixed, lower pump prices over an extended period. While such an approach would inevitably reduce government revenue, it could, in the short term, stimulate aggregate demand by increasing disposable income and supporting higher levels of economic activity; ultimately translating into higher VAT intake. Alternatively, the government of Saint Lucia could have adopted, like the other OECS countries, some level of pass-through, either fully or partially.
In the table below are the prices that Saint Lucian could have paid at the pump if a shared sacrifice approach had been adopted:
Fuel price pass-through scenarios vs. fixed high price scenarios
Conclusion: People before petroleum profits
Fuel pricing policy is not merely a technical exercise in taxation or revenue optimisation. It is a social contract between government and citizen – a reflection of whose interests are being prioritised. The current trajectory suggests prioritisation of fiscal gain over social equity. But in a country still grappling with the aftershocks of COVID-19, supply chain disruptions, and a precarious external environment, such rigidity is neither economically sound nor morally defensible. Saint Lucia must choose either to uphold a pricing mechanism that reflects shared sacrifice and market realities or continue with one that fuels inequality and erodes public trust. The time for a smarter, fairer fuel future is now.
Tommy Descartes is a Saint Lucian regional economist and an advocate for data and evidence based policy analysis. He is also the founder of the think tank Island Economics and Empirical Insights, Intelligence and Informatics, a data analytics company.
UWP is unconscionable! You people disgust me. Y’all will not fool St Lucians with this type of BS. Chas bragged how he had a document which was to be signed as soon as he got into power . . . The intention was to lower gasoline prices. He was in and now he’s out, up to now he couldn’t find the document. Consequently, during his administration the price of gas NEVA lowers.
We pay BOTH VAT and Income Tax. Fuel prices are some of the highest. The roads are horrible. Meaning higher vehicles maintenance costs and government revenue due to a higher need to import parts. At last Chass lowered VAT to 12.5% Peep brought it right bank up with that 2.5% levy. Raising tax rates in an inflationary and zero growth environment can only be contrived in the head of a lunatic.
ST Lucians must make learnt by now the campaign strategies of our political parties. We have become so partisan, that we become blind to truth, and follow like sheep. In an election season like this, there will be lots of promises made and scandals created, without evidence.
This article is very well written and clearly very well researched. Also, it proposes sound policy options that could guide ANY administration. Too often, we see articles presenting opinions that are not supported by solid evidence and too often, readers react based on emotion or political bias.
As a small island developing country, with limited resources and facing many challenges, our decision-making must be empirically-based. We also need to raise the level of discourse and to be more open to alternative views, both within official and wider circles. For example, look at the type of debate that takes place in the Barbados Parliament.
Further, we are too small a nation to allow our efforts to be stymied by political tribalism and we should be pursuing greater unity of purpose. Finally, while it is nice to call the talk shows to express our opinions, or to comment via social media, there is still so much to do on the ground, where our energies could be better focused. In short, we need less hot air and more action on the ground.
Crow, did you read the article? It shows prices over the last two years when Chas was not in power.