Pacific Economic Bulleting Policy Dialogue: Harnessing Competitive Forces to Reduce Fuel Costs in Small Island Economies

This report was prepared by Apruva Sanghi and Alan Bartmanovich. The supply of liquid petroleum based fuel products in OECD countries is a competitive business, with multinational oil companies such as BP, ExxonMobil, Shell and Total competing with each other to generate profits. In the remote small-island states such as in the Pacific or Caribbean, fuel markets are considered too small to have such beneficial competition. This paper highlights how two of the smallest Pacific small island states— Samoa and American Samoa—have harnessed competitive forces to lower fuel prices, resulting in economy-wide benefits. Understanding the ‘Samoan models’ has important implications for other small island states concerned with spiralling fuel costs and their adverse developmental impacts.