The Tribune

• Argue recent 64-cent drop gives Gov’t room to act

• Many said to be on brink of ‘throwing away the keys’

• Say consumers will see lower price even with hike

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian petroleum retailers yesterday urged “this is the time” to grant a margin increase following last week’s 64-cent price drop with many said to be on the brink of “throwing away the keys”.

Raymond Jones, the Bahamas Petroleum Retailers Association’s (BPRA) president, told Tribune Business that implementing the industry’s long-desired margin increase of 25 cents per gallon now would still result in a “net” reduction in gasoline prices for consumers and fulfill the Government’s objective of not imposing further cost hikes in voters.

He reiterated that such an increase, which would be the first for 12 years, would ensure petroleum retailers can survive in an environment where their fixed, inflexible margins have been “eaten up” by multiple cost hikes due to the inflation that has dominated the post-COVID economic landscape.

“The current situation is this,” Mr Jones told this newspaper. “The Government has maintained a position that it cannot do anything that drives the price up. In the last week, we had a 64 cent decrease in the price of fuel in one day.

“It’s time to shake the tree a bit. The price has dropped significantly. This is the time to give us an increase of 25 cents. That’s a net, net win. The consumer will still see a 39 cents drop in the pump price. If you are waiting for it to drop, you got the drop. We don’t want the increase to take away the drop. We only want a portion of that so it allows us to survive.

“Retailers are on the verge of closing down. It’s almost impossible to operate with the current margins and current operating cost expenses. We need relief, and are only asking for 25 cents a gallon. We understand the Government’s position, not wanting to put more cost on the public. We understand that,” he added.

“But as business people we need to be able to maintain our employees, pay our bills and stay in business.” Mr Jones said the 25 cents increase in the gasoline margin that the Association and its members are now seeking would likely increase the average road user’s weekly fuel bill by less than $5.

“We’re asking the Government to support us, help us out and give us an increase so we can survive,” he pleaded anew. “Many retailers have been talking about throwing away the keys. I said: ‘Hold on. The Government’s got to see a way through to give us an increase so we can survive’,” he added.

“This is the time. If they give a 25 cent per gallon increase the consumer will see a net decrease of 40 cents per gallon. We feel that if they do that the price will still go down significantly. This is the time to give us a margin increase so we have hope of staying in business.

“At the end of the day, petroleum retailers are very, very frustrated at not being able to make money and are simply spinning the wheels, paying the cost of electricity, paying the cost of operations. People are so frustrated. They want to stop all gas and diesel sales and close up. That’s not good for the economy as there will not be enough service stations to meet demand,” Mr Jones said.

“Twenty-five cents would be a small increase to keep these retailers and entrepreneurs in business. It’s been 12 years since the last margin increase, and look at all the costs that have gone up in that time. It’s absolutely ridiculous we’re at this point. We’ve been talking to this administration for the last two years for 25 cents per gallon. Something needs to change.”

The Government may not view a 25 cents per gallon increase as small. It has been consistent, ever since it began discussions with the retailers and their Association in March/April 2022, that it will not agree to any solution that increases gas pump prices for Bahamian motorists, such as a margin increase.

The Davis administration has also argued that part of the dealers’ plight stems from the rental rates, royalties and franchise fees they pay to their landlords, namely the oil majors of Esso (Sol Petroleum); Rubis; and FOCOL Holdings (Shell).

But Mr Jones, who spoke to Tribune Business after yesterday obtaining a banker’s draft to pay his wholesale supplier for a new shipment of fuel, reiterated that the industry’s price-controlled fixed margins, which are set by the Government, have been obliterated by increases in electricity rates, credit card fees, bank fees, the minimum wage, insurance, security and many other ordinary operating costs.

“We have to pay for our fuel in advance,” he added. “The margin ain’t moving at all and everything is eating it up. To pay Bahamas Power & Light (BPL), we have to beg them so we only pay a little bit, make a bit of money and then come back again and pay someone else.

“It takes so much of our business time just to stay in business because we don’t have no room in which to breathe. It’s gotten worse because costs have been going up. On top of that, the bank charges you... if you are depositing over $10,000 you have to pay them 4 percent of that.

“Listen to this now. When the customer shows up and they use their credit card, because of the discount they get, 15 cents of the 54 cents margin goes on the credit card processing fee. We’re between a rock and a hard place,” Mr Jones continued.

“We like the digital banking because it speeds the process up, customers keep track of their money and there’s less cash handling but, at the same time, the cost to do that is very prohibitive if you are on a fixed margin. We can’t adjust our prices like a bar or restaurant.

“The headline needs to be retailers need assistance now. Prices have dropped, so this is an opportune time to act and for the Government to give them the margins they desperately need.”

The Government has also ruled out reducing its petroleum industry taxes ti aid consumers, and counter the impact from a margin increase, as to do so would create a revenue shortfall it would have to cover elsewhere in its Budget.

“It’s been a difficult situation because if it was easy we still wouldn’t be talking about it now, and I’m not making light of it,” Michael Halkitis, minister of economic affairs, said in early October. “It’s a difficult situation and we understand the plight of the retailers and the conditions that they have to operate in, including the rents and franchise fees and all sorts of things. It makes it difficult.”

Mr Halkitis said the wholesalers - Esso, Rubis and Shell (FOCOL) - also want a margin increase, but did not indicate that a formal proposal is being considered. He added that the Government is examining the entire value chain in the petroleum sector, from when the wholesalers purchase their supplies down to when it gets to the pump, in an attempt to understand how best the Government can help lower the price of gasoline for consumers.

The government currently gets $1.70 out of every gallon of gas, while petroleum retailers get 54 cents and 33 cents on diesel. “Government does not want to be the cause of gasoline prices going up,” Mr Halkitis reiterated.