2024-03-11 12:46:34
The three-point increase in the Value Added Tax (VAT), which will take effect from April 1, 2024, will also affect the gallon of Extra and Ecopaís gasoline, which will go from a fixed price of USD 2.40 to USD 2.46 .
Fuels for the automotive sector pay VAT in Ecuador since 2003, by decision of then-president Lucio Gutiérrez.
How the price is calculated now
Unlike other products in the basic basket, VAT on fuels is not applied to the final price paid by the consumer, but to the terminal price and the marketing margin of service stations.
This is stated in decree 467 of June 30, 2022 signed by then-president Guillermo Lasso, with which he froze the prices of Extra and Ecopaís at USD 2.40 per gallon.
How much more will you pay?
But how much more will be paid once the VAT rises to 15%?
The three-point increase in VAT will modify the current price of Extra and Ecopaís gasoline at the terminal plus its marketing margin, causing an increase in the final price for the consumer of USD 0.06.
With this, the price per gallon of Extra and Ecopaís will go from a fixed price of USD 2.40 to USD 2.46 per gallon.
For example, a person who has a car with an 11.3-gallon gas tank now needs $27.12 to fill the tank.
But once the 15% VAT comes into effect you will need USD 27.80 to fill the tank.
The price of a gallon of Super gasoline will also show an increase because the price is free, that is, it varies each month depending on the international market.
The marketing margin of the Super is also free, that is, it depends on the service station.
Petroecuador’s reference price for Super gasoline, which will be valid until March, is USD 3.75. If the 15% VAT were already in force, Super gasoline would rise to USD 3.85 per gallon.
For example, the owner of a car with a displacement of 11.3 needed USD 42.38 to fill the tank with Super. But if the VAT had already been at 15%, that consumer would have needed USD 43.5 to fill the tank of his vehicle.
Focus the subsidy, in analysis
In addition, President Daniel Noboa has announced that he is advancing a plan to target subsidies from Extra and Ecopaís, which is expected to save up to USD 550 million per year.
The proposal under analysis is to apply a band system, which will allow the progressive monthly increase in the price of gasoline, in a percentage to be defined, until the international price is reached.
Now, Extra has a real price without a subsidy of USD 2.80 per gallon, that is, the State provides a subsidy of USD 0.36.
On the other hand, Ecopaís should be sold at an international price of USD 3.04 per gallon; That is, it has a higher subsidy of USD 0.57 per gallon.
Noboa said that the price of gas for domestic use and diesel for the automotive sector will not be touched.
What will happen to diesel and gas
Gas for domestic use does not have VAT, so its price will not change in April 2024.
On the other hand, diesel for the automotive sector will increase in price by USD 0.05 per gallon. That is, diesel will cost from USD 1.75 per gallon to USD 1.80 per gallon. In the case of diesel, VAT is also applied to the terminal price and the marketing margin.
When Rafael Correa’s government decided to raise the VAT from 12% to 14% temporarily due to the earthquake, it decided to subsidize two points of that increase so that fuel consumers would not experience an extra expense.
Extra, the one with the highest consumption
If you only look at the gasoline market, Ecopaís was the one with the highest consumption in Ecuador, with a consumption of 39,716 barrels per day in 2023, according to Petroecuador.
It was followed by Extra, with 37,481 barrels per day. Meanwhile, Super had a marginal consumption of 3,309 barrels, which is mainly due to the fact that it has a higher price than lower octane gasoline.