PORT MORESBY, 31 July 2008 (IRIN) - Throughout the country goods and services cost more, thanks to the increase in the global fuel price, which is being passed on to businesses and consumers, according to the Bank of Papua New Guinea. In 2007, the fuel price per litre was around K2 (US$0.72) compared with K5 ($1.82) now.

Many remote communities in Papua New Guinea are not accessible by road so air service is vital to their local economies. However, some small airlines, including Madang-based Airlink, have cut back or ceased operations because of higher fuel costs. National flag carrier Air Niugini continues to increase fuel surcharges because of the high cost of aviation fuel.

In Bougainville, an autonomous island which is still an integral part of Papua New Guinea, taxis charge K100 ($36.45) for a three-hour ride to and from mainland Bougainville to Buka Island and another K2 ($0.72) just to make a three-minute crossing by boat to and from Buka Island. The whole trip used to cost only K20 ($7.00), a price that was quite affordable for a worker who earns an average of K300 ($100) a fortnight. The price increases really hurt, workers say.

One vehicle owner, Francis Baru, told IRIN, "We sympathise with passengers travelling in our vehicles but at the same time we also need to make enough money to repay our loans and look after our families.

"If fuel prices continue to rise," he said, "we will be forced to pass on these additional costs to our passengers, but we hope they will fall … that will be really good for all of us," Baru said.

In Manus, an island province north of Port Moresby, the capital, fares are even higher as people are dependent on boats, which are particularly costly to run.

Linus Pokanau, a fisherman and boat owner from Manus Island, told IRIN the price of zoom (petrol mixed with oil) was the most expensive and many boats now were anchored as fishermen could not afford the fuel.

Thomas Abe, chief executive officer for a consumer watchdog group, Independent Consumer and Competition Commission (ICCC), expects fuel prices to continue rising due to global demand. The ICCC regulates the pricing formulae of petroleum products in the country.

Even though Papua New Guinea is a crude-oil producing country, once the oil is refined by InterOil, a Canadian petroleum company, consumers pay a rate closely pegged to the world rate.

Deputy Prime Minister and Minister for Mining, Puka Temu, in June announced that the government would start subsidising fuel prices on 1 September 2008, by reducing the excise duties on fuel products, which would cut the prices of petroleum products significantly.

"Eliminating the excise tax on zoom will be of particular assistance to those that use small boats for transportation and for fishing in rural areas," he said.

"Reducing the excise on diesel will also help PMV [taxi] drivers, transport companies and those who run power generators, while reducing excise on petrol will help all those drivers who dread having to fill up at the petrol station. This government says it is working with key stakeholders to see if there are other ways that the price of fuel at the pump can be minimised," Temu said.

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