Petroleumretailers wantbetter deal
Discussions are heating up between the government and petroleum retailers, who are calling for revisions to inflexible 30-year old diesel and 9-year-old gasoline margins.
The current margins retailers collect on gasoline and diesel are fixed, so while the consumer might decide to drive less to save a few dollars, retailers are seeing fuel prices rise at the pump, paying more to buy it, but earning no more on each gallon sold. Oswald Moore, chairman of the Margin Relief Committee of the Bahamas Petroleum Retailers Association(BPRA)toldGuardian Businessyesterday that at 9 cents per dollar for diesel and four cents per dollar for gas, the margins would be difficult for any business.
“Our request is for an increase of seven percent on the cost of each product, diesel and gasoline,”according to an earlier statement released by the BPRA.”This will allow us to earn a gross profit of$0.11 on the dollar for diesel and$0.16 for gasoline.”
For gasoline, retailers get a fixed 44 cents per gallon and the government takes$1.05 plus 7 percent stamp tax on the landed cost of gas, while wholesalers take 33 cents, according to one petroleum retailer. Neymour explained that in New Providence, diesel retailers could take 19 cents per gallon and the Government collected 25 cents, plus 27.5 percent of the invoice price, plus 7 percent for stamp tax. Diesel wholesalers he said got 19 cents per gallon.
Increasing fuel prices is the ubiquitous factor which will cut into everyone’s bottom line and take a few more dollars from every wallet, directly or indirectly. An increase in the margins for retailers would mean either a decrease in the margins for government and wholesalers, but much more likely an increase in fuel prices for the consumer.
One petroleum retailer toldGuardian Businessyesterday that while he feels the customer’s pain, he was’getting killed’on his return on capital, and said he was desperate for relief from a fixed margin. According to him, some petroleum retailers faced$9,000 monthly electricity bills, exorbitant rent, and had to find more money to effectively make less as gas prices rose. He reasoned that Bahamians love their cars and love driving, so they will find a way to fuel their vehicles, allowing the entrepreneurs to stay in business and keep employing Bahamians.
Moore had a similar position on the market’s ability to absorb an increase. He has been conducting research on fuel price structures throughout the region and said that in all the other territories, except for those with refineries, the price of the product was already over$5.00 per gallon, with retailers taking margins on diesel between$0.70 and$0.90, and on gasoline margins between$0.72 and$1.02.
“So as it seems, we are way behind the eight-ball, except for the countries who have refineries,”Moore said.
Some petroleum retailers have called for a move to self-service stations, to cut overhead by reducing staff costs, according to Moore.
“First, we should not disenfranchise those in the lower economic sector of the industry,”Moore said in reply to that reasoning.”Secondly, The Bahamas as a whole lacks diversification of industry, thus every option to provide employment should be utilized.”
The BPRA margin relief chair said that going to self-service stations was not the long term solution. If fuel costs continued to increase but margins remained static, the industry would eventually find itself in the same situation later.
The matter is likely problematic for the government, as further spikes in fuel prices impact essentially all Bahamians, individuals and businesses, and the country is trying to recover from a difficult economic period.
“What one has to take into consideration is not only the effect the increasing oil prices may have on retailers, but also the effect it will have on consumers, paticularly in New Providence and specifically in the Family Islands,”Neymour said.”One also has to take into consideration the wholesalers in coming together with a view of analyzing the existing market and what is acceptable at this particular time.”
According to Moore, a formal communication was submitted to five government ministers, including the Office of the Prime Minister and Minister of State for the Environment Phenton Neymour on February 18. He said the communication requested a meeting on the subject and outlined the margin relief objectives. Requests for additional information were made, and Moore said that likely by early next week the government would receive its second formal communication on the subject.
Neymour acknowledged that informal discussions had been held with various petroleum retailers on the subject, but the government was awaiting a formal application and additional information before it would make a decision. He said active dialogue is ongoing but also noted some of the underlying complexities of the issue.
“When we have high oil prices, consumers must recognize that it does not mean that the retailers, the wholesalers or the government increase their revenue,”Neymour said.”I think that is critical. Because gasoline prices increase people drive less and consume less petroleum and diesel.
“The government is finding it important that consumers recognize that there is a great need for the conservation of energy, particularly in The Bahamas. We feel it is important that individuals recognize that higher oil prices are a real threat to our economy. That is why we began the formulation of a national energy policy and that is why the ministry has put together an action plan that is to be considered by the government.”