The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A Cabinet minister yesterday warned that any spike in global oil prices caused by Saudi Arabia's imminent production cut will further harden the Government's stance against granting petroleum retailers a margin increase.

Michael Halkitis, minister for economic affairs, said the Davis administration will take the Saudis' one million barrels per day production cut, which is due to take effect in July, “into account" during future talks with the Bahamas Petroleum Retailers Association (BPRA) that have now lasted for 14 months with no agreement reached.

Speaking to media ahead of the weekly Cabinet meeting, Mr Halkitis said “it all depends” on whether global oil prices are impacted by Saudi Arabia's actions. Oil prices actually eased slightly yesterday amid market expectations that sluggish global economic growth, and reduced demand, will offset the Saudi move to reduce output from ten to nine million barrels of oil per day.

"We have to look at what's happening in terms of the world economy; if it's slowing. For example, if China is not growing as fast as it has traditionally been, then that will affect their demand," Mr Halkitis said. "So it will be a formulation of what other countries do and how the global economy is performing, and what the demand is for fuel. We are hopeful that it doesn’t lead to any spikes, but that is something we are monitoring.

"We take all of these things into account. As I have said, you know, our view is always what happens at the end of the day at the pump, and if you see the impact of this cut in production is an increase in price, you can see the reluctance of government to do something to add to any increase that might come from a cut in production.”

Raymond Jones, the Bahamas Petroleum Retailers Association's president, told Tribune Business that their price-controlled fixed margins mean gas station operators are not impacted by global oil price rises. Whatever the cost of fuel, they still earn the same 54 cents and 34 cents per gallon of gasoline and diesel sold, respectively, and it is the consumer who feels the impact at the pump.

Petroleum dealers are impacted by oil price hikes at the front-end, as they have to pay the likes of Rubis, Esso (Sol Petroleum) and Shell (FOCOL Holdings) more to purchase their fuel supplies, which can result in increased credit card, overdraft and other bank-related fees.

Mr Jones said the Association has received "zero" response or contact from the Government following the decision by multiple gas stations to temporarily cease diesel sales recently, and he was working on a media statement to respond to "ridiculous" government statements suggesting gas station operators are profitable and do not need a margin rise.

For the dealers, the core issue remains that the fixed, price-controlled margin set by the Government is now simply insufficient to cover ever-escalating costs amid the ongoing surge in inflation and cost of living crisis. Mr Jones, pointing to the 24 percent or $50 per week minimum wage increase, and Bahamas Power & Light's (BPL) phased fuel charge hikes, said: "A lot of it has been driven by the actions of the Government."

He also pledged to fully disclose the Government's last proposed resolution, which dealers had accepted subject to what has been described as minor adjustments. This has never been implemented, and Mr Jones said: "We compromised by saying: 'If you think this is the best you can do, thank you very much. We'll take it'. Now they're saying they cannot do it." The Association is seeking a 30 cent

The Saudi Arabian energy ministry announced that they wanted to cut production by on million barrels per day starting in July as the other OPEC producers agreed in a meeting in Vienna to extend earlier production cuts through to next year.

The BPRA had been lobbying the government for a margin increase when oil prices were at their relative lowest in the past 10 years. This they argued would give consumers time to adjust to the new prices without feeling the stark rise in prices, something that the government is guarding against.

The BPRA is asking for a 30 cent on the gallon increase on the margin, something they say motorists in one of their recent polls have agreed with granting to them. Oil prices last night stood at $71.86 per barrel on the West Texas Intermediate index, and $76.38 per barrel for Brent crude.

Meanwhile, Mr Halkitis said of the need to collect $226m in real property tax arrears from foreign-owned properties: “When you look at real property tax, and you're looking at over $800m, over $200m of that is owed by foreigners. You send out a bill and you want people to pay, and then you do some follow-ups. Then, as the delinquencies increase to months and years, then the powers that you exercise increase.

“So the Department has the power to go as far as if it comes to that, especially if we are talking about foreign-owned properties, vacant land, and those things where delinquencies are stretching into the years and all other efforts to collect have been exhausted. Then you have to be able to exercise that policy, which is in the law, which has been done in the past, which you don't want to do, but when you have stubborn delinquencies that’s what you have to do.”

Mr Halkitis also addressed controversy swirling around the rental costs for the recently-commissioned Consumer Protection Commission (CPC) headquarters. “Accommodations for government ministries and departments are handled by the Ministry of the Public Service," he said.

"They have a structure. They have an accommodations manager, they have a team that assesses accommodations. When accommodations are required that is the department that deals with it. In this particular case, in the last administration, Price Control and CPC (Consumer Protection Commission) were under the Ministry of Labour.

“This administration they are under the Ministry of Economic Affairs. They were sharing space - Price Control was in the Labour building on Carmichael Road, and the CPC was in Charlotte House and some of the Ministry of Labour’s space. We decided that they should have their own space.”

Mr Halkitis declined to comment on how much the Government is paying in rent for the new consumer offices on Tonique Williams Highway amid criticism from Commission deputy chair, Tyrone Morris. He responded: “There is nothing untoward. What we have is a disgruntled individual who has decided that, you know, he would make certain allegations.

"Boards, committees, ministries or departments do not decide where they want to go. The accommodations are settled by the Ministry of the Public Service. Everything was done according to their policies and fits within their standards, and within their ranges of what they pay for accommodation.

“We're renting an entire building. If you look at the building, it's an entire building. I know some figures have been thrown out to say it's a lot of money. You pay by the square footage. The square footage that we are paying falls within the range of what the public service pays.

“I don't recall the exact amount, but we pay per square foot. The Government pays anywhere from, in some cases, depending on the building, you can pay up to $25, and in some cases, you pay up to $60, but you pay per square foot. So, we are renting the entire building. And let me say once again, the Ministry for the Public Service has policies, they have guidelines, they have procedures in terms of suitability, terms of inspection, in terms of price.”