The Tribune

A gas station operator yesterday warned the 24 percent minimum wage increase will “almost certainly” force the sector to cut staffing levels unless the Government grants a long-awaited margin increase.

Vasco Bastian, the Bahamas Petroleum Dealers Association’s (BPDA) vice-president, told Tribune Business that the industry’s business model must be modernised and switched from fixed price-controlled margins on gasoline. He added that gas station convenience stores, a key revenue centre for dealers, are also being hit by the Government’s expanded grocery price control regime and reduced margins on breadbasket items.

With the industry’s gross profit margins largely fixed at a time when a wide variety of expenses are rising, Mr Bastian said petroleum retailers are being left with no choice but to cut costs if they are to survive. The sector is among those that will also have to absorb the $50 per week increase in the minimum wage, which is set to rise from $210 to $260 come New Year’s Day, given that a number of employees earn this level of take-home pay.

Mr Bastian said: “We are looking to promote our self-service and trying to stay afloat without cutting staff, but it is almost a certainty we will reduce staff complements for 2023. We are now at the end of the year, and petroleum dealers are bracing for even higher costs with the minimum wage increase slated for January 1.

“Minimum wage will increase by approximately 24 percent for all employers. However, petroleum retailers are not able to react to this as they have a fixed margin per gallon.” As a result, Mr Bastian said staff reductions of up to 25 percent were being mulled to enable gas station operators to make ends meet, along with the possibility that Bahamians may have to become used to self-service at the pumps. Many gas station employees are paid minimum wage.

Petroleum dealers earlier this year called for a 50 percent increase in their gasoline retail margin which, if granted, would have raised it by 27 cents per gallon from 54 cents to 81 cents. However, despite a series of meetings with the Prime Minister, Cabinet ministers and government officials, no change in the margins was granted with the Davis administration concerned about imposing further inflationary costs on families and businesses amid the spiralling cost of living crisis.

The talks eventually seemed to peter out after oil prices began to ease on global markets. Oil prices, as Tribune Business went to press, stood at $78.42 per barrel on the West Texas Intermediate Index and at $82.20 for Brent Crude. However, while the petroleum industry’s concerns may have abated for now, the problems driving them have not gone away and are set to be exacerbated by multiple cost increases that will hit in 2023.

Mr Bastian said: “This is not about political parties; this is about the petroleum industry. The industry model has to be changed in order to reflect an adjustment to the times because the times have changed.

“Margins were relevant 40 years ago, but [fixed] margins don’t make any sense in 2022-2023. The price of crude oil, when margins were first implemented, was $15 per barrel, but it has gone up through the course of 2022 to $146 a barrel and now it’s back down to $80 a barrel. It can go up as much as it can go back down again. When we do get this right and let this make sense for all and sundry?”

Margins for petroleum dealers have not been increased since 2011, when the last Hubert Ingraham-led Free National Movement administration was in office. “Grinch never left the gas station industry. The Grinch didn’t only hit us in December, the Grinch has been here for 12 months and beyond, and prior to the 12 months of the year. We’ve been dealing with the Grinch for every month in 2022,” Mr Bastian exclaimed.

It has now been more than three months since the Government last met with the Association’s representatives. “I speak to the minister (Michael Halkitis, minister for economic affairs) casually but nothing concrete has come out of it. We haven’t met with them around the table, but we’ve had some informal meetings with Simon Wilson (financial secretary), who has always been a very good supporter of the of the petroleum dealers,” Mr Bastian said.

He added that the “buck stops with the Prime Minister”.