Tuesday, Jun 18, 2019
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Gas margin increase would be political suicide

The Bahamas Petroleum Retailers Association (BPRA) is in a bad situation. The retailers are seeking government authorization for a significant increase in the profit margins allowed regarding the sale of gasoline and diesel.

The increases proposed by the retailers would amount to an additional $0.28 per gallon for diesel and an additional $0.30 per gallon for gasoline, according to the retailers. Consumers would face higher bills for fuel if the government agreed to the increases. The government regulates the margins.

BPRA representative Oswald Moore told The Nassau Guardian Friday that the industry cannot survive under the current margins, as retailers spend$1,000 to buy diesel and earn only$40; or$1,000 to buy gasoline and earn only$90.

What the retailers must understand, however, is that there are few sympathetic stakeholders when it comes to their cause.

The price of gas in New Providence has already risen above the $5 level and it is still winter. Previous to the earthquake and tsunami in Japan, the price of oil per barrel appeared to be slowly marching towards the high of nearly $150 per barrel last seen in 2008.

No government concerned with winning a general election is going to grant fuel retailers margin increases near to a general election. Bahamians are already disturbed at the high price of fuel, and the government can do virtually nothing about it.

The only option the government has to reduce the price of fuel is to cut its tax on it. However, the large budget deficit currently faced leaves no room for such a move.

The public is also unlikely to support the cause of the retailers. With the price of oil rising, citizens also have to pay higher electricity and food bills. Who wants to pay more for gas and diesel?

There may be a simple market-based solution to this problem. The retailers who cannot make it may just have to go out of business. With fewer gas stations in the marketplace, those that remain would have more customers. The larger number of customers would increase the average purchase rate per station.

No government wants to increase an across the board tax near an election. That is what a margin increase would be. The retailers will probably find that many listen to their sad story, but few stand in support of their cause.

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