Costa Rica Has Highest Gasoline Prices In Central America

Costa Rica has the highest gasoline prices in Central America reveals a study of fuel prices in the region by El Salvador, where a US gallon of regular sold on June 10 in that country for us$4.25, in Costa Rica it was us$5.19, while only us$4.72 in Nicaragua, us$4.60 in Honduras and us$4.26 in Guatemala.

So, why are gasoline prices so much higher in Costa Rica? Simple, taxes and the lack of a refinery, meaning all gasoline products are imported and paid for at prices set by international markets.

The production and distribution of gasoline products in Costa Rica falls on the state agency, the Refinadora Costarricense de Petroleo SA (RECOPE).

RECOPE buys gas gasoline on international markets, imports it, stores it and the distributes it all gasoline stations across the country.

And unlike in many other countries, the end price (retail) is set by the government and applies to all gasoline sold at gasoline stations.

In the El Salvador, for example, the price for a litre of regular gasoline this week can vary from us$4.11 in some areas and retailer to us$4.15 in others.

Today, in Costa Rica, a litre of regular gasoline costs ¢724 colones, while in El Salvador is it ¢581 (using ¢510 colones per dollar exchange).


Source: http://www.minec.gob.sv

The main cause of the high prices in Costa Rica is the creation of the Ley de Simplificación y Eficiencia Tributaria in 2001 that levies a flat rate tax on all fuel prices, which is updated every three months to allow of inflation.

The money collected from that tax is supposed to go towards road infrastructure.

In El Salvador there is a similar tax, but it rounds about us$0.12 (¢61 colones), plus the 13% sales tax, while in Costa Rica it is a flat are ¢200 colones (us$0.39).

And to alleviate the wallet of consumers, the Salvadoran government suspended temporarily one of the taxes equivalent to us$0.09 (¢45 colones) for each litre of gasoline sold.

In Costa Rica there is no such reduction in the taxes on gasoline.

Adding to fuel (pun intended) to the gouching prices is also the fact RECOPE - a state agency - has to pay income tax on its earnings, resulting in taxes on top of other taxes.

In addition to the taxes, RECOPE - and we, in turn - are forced to pay international prices for refined gasoline products, instead of the cheaper crude and then refined locally, because the state agency does not have the ability to process oil.

For example, the current price for a barrel of refined regular gasoline, as of May 10, was us$143, while only us$104 for crude.

Now here is the kick in the head, RECOPE does have a refinery, it is located in the province of Limón, near the Limón and Moín docks where fuel tankers haul in gasoline. But, the plant is so outdated and inefficient that RECOPE had to shut it down. And when it did operate, it couldn't produce product at a reasonable price and then only producing to a maximum of 30% capacity (18.000 barrels daily) of the demand.

In fact, the plant was so inefficient that the Autoridad Reguladora de los Servicios Públicos (Aresep) stopped including its production when determining fuel prices.