The Tribune

• Such move ‘ill advised’ and threatens ‘nascent recovery’

• Governance reformer calls for ‘good sense’ to prevail

• Suggests ‘hybrid’ margins could be industry’s solution

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A gas station shut down would “bring the country to a halt” and threaten the “nascent recovery” from COVID-19, a governance reformer warned yesterday, adding that such a move would be “ill-advised”.

Hubert Edwards, head of the Organisation for Responsible Governance’s (ORG) economic development committee, told Tribune Business that any such action by dealers would disrupt a Bahamian economy that is “still in a delicate place” and needs no further disruption from self-inflicted shocks.

Voicing sympathy, though, with the “plight” of gas station retailers amid ongoing price volatility in the global markets, he added that the industry needed to address its problems with the Government given that talk of an Easter shutdown could potentially undermine one of the busiest periods in the Bahamian tourism calendar.

Acknowledging that the Government’s fiscal challenges make cutting taxes on gasoline sales, which are among its biggest revenue generators, problematic especially in the absence of an increase elsewhere, Mr Edwards said it should nevertheless “facilitate profitable businesses” and not impose “undue pressure” on specific industries through its policies.

Gas station operators are urging the Government to increase their margins by 50 percent, which would raise them from the present 54 cents per gallon of gasoline to 81 cents, and change the basis upon which they are calculated to a percentage as opposed to a fixed mark-up.

They have warned that up to 80 percent may elect to close their stations this weekend unless their grievances are addressed, and the ORG economic chief yesterday even suggested a hybrid approach, with fixed margins maintained below a certain level, but a percentage used once the price goes above a certain level.

Anticipating that any gas station shut down will not last for long, Mr Edwards said the situation still has the potential to significantly undermine an economy that runs almost exclusively on fossil fuels on both land and sea. “If there was a shut down it would be significant,” he told this newspaper. “It has the potential to bring the country to a halt, and certainly will have an adverse impact on economic activity.

“The overall impact depends on how long a shut down lasts for. The action by itself, or the possibility of such action, is sufficiently disruptive. It’s an indication there’s a sector of the economy feeling the burden, feeling the pinch, so the knock-on impact on consumers would be huge.

“I hope that good sense prevails, and persons can sit down and talk this through and, at the end of the day, do nothing that harms the recovering economy. We’re still in a delicate place, and still have to protect this. I’m sensitive to the plight of operators. They indicate the circumstances place their operations under undue pressure. There must be a way to sit down and talk this through with policymakers, and come up with a solution that avoids shutting down the country.”

While gas prices at Esso, Rubis and Shell are all presently above $6 per gallon, global oil prices have somewhat eased - and stabilised - after peaking at over $130 per barrel in the aftermath of Russia’s invasion of Ukraine, when the US announced it would ban Russian oil and gas imports, while the UK said it would phase them out. 

Predictions of $200 per barrel have yet to materialise, with current indices at around 50 percent of that level. Brent crude was at $100 as Tribune Business went to press last night, having risen by 1.58 percent during the day, while West Texas Intermediate was up 1.76 percent at $95.95 per barrel. Depending on when the three oil companies do their wholesale buying, it is possible consumers may see a slight decline in pump prices when the next shipment comes in.

Gas station dealers have been especially concerned about the pressure rising gasoline costs impose on their cash flow and credit lines, as they have to pay out more for a 10,000 gallon tanker load and then have to wait to recover this expense on what are already thin margins.

“We have to put issues squarely on the table and say that we may not get everything we want at the moment, but if there is a commitment to find a solution and understand why we got here, that will be good in itself,” Mr Edwards said, warning about the impact any gas station shut down will have for the Easter tourism season peak.

“To do anything that harms this nascent recovery will be ill-advised,” he said. “It would certainly disrupt commerce. Persons need fuel to get to work, persons need fuel for other transport activities. If it’s temporary we may not feel it, but if it was to be prolonged - and I don’t anticipate that - it could impact the tourism product over the holiday weekend, so we want to avoid that as much as possible.”

Noting that the gas station operators’ concerns must be resolved “in the best interests of the country” given the integral role they play in the economy, Mr Edwards said the Government would be challenged to reduce the taxes it earns on gasoline - which currently stand at around $1.60 per gallon - given its parlous fiscal state.

He added that consumers and businesses “sometimes have to make sacrifices for a better tomorrow”, saying: “Caution is the name of the game.” As for calls to increase gas station operators’ margins and the way these are calculated, Mr Edwards said: “The Government and policymakers should take a careful look at the industry, and any policy positions which disadvantage or create under pressure for a competitive space should be addressed.

“I’m not well enough informed to say the industry must move from a fixed margin to a percentage.... The answer may lie in a hybrid where they are fixed until they reach a certain point, and falling above a certain level become a percentage. The bottom line is that the Government should facilitate profitable businesses. If it creates disadvantages to businesses, it hurts the country and consideration should be given to making the necessary adjustments.”

Calling for more proactive planning, and addressing challenges as they arise instead of delaying action, Mr Edwards said: “One of the things this is showing us is how vulnerable we become when we fail to things we should do early. It reduces our capacity to respond in the moment of pressure. It’s my hope that we walk away from this continued crisis with a better appreciation of what the challenges are and a greater commitment to fix these things which will help us in future.”