The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Multiple Bahamian petroleum retailers were yesterday said to be on the verge of “closing the doors and giving the keys back” within a month unless the Government finally delivers on a margin increase.

Raymond Jones, the Bahamas Petroleum Retailers Association’s (BPRA) president, yesterday told Tribune Business “all we’re asking for is to survive” given that the industry’s price-controlled fixed margins have been “decimated” by numerous cost hikes amid the post-COVID cost of living crisis.

Speaking after Michael Halkitis, minister of economic affairs, yesterday again reiterated that the Davis administration will not agree to any solution that increases gas pump prices for Bahamian motorists, such as a margin increase, the Association chief said the two sides had appeared on the verge of a deal back in April but then nothing happened

Suggesting that the Government “maybe got cold feet”, Mr Jones told this newspaper that he and his members had agreed to accept its proposal to switch to a percentage-based margin rather than the present fixed system. This would have enabled gas station operators to earn more when gas prices rise, but slightly less when they fall.

According to Mr Jones, this worked out to roughly a 25 cent increase in gasoline margins on an annual basis once fluctuations in fuel prices were taken into consideration. Revealing that the Association and its members were even prepared to impose a “a cap” if pump prices reached similar heights to last year’s $7 per gallon, so that the percentage would remain as if it were $6, he added that “the time for talking is over”.

“The position is quite clear. It’s simple,” Mr Jones told Tribune Business. “The Government has to understand that certain things the public has to pay for. Every other business person other than people with these fixed margins is able to increase prices to offset greater costs, and even the supermarkets said that if those things with fixed prices go up and price control doesn’t respond, they won’t sell them.

“Our entire business is based on a fixed margin for fuel. The margin has been decimated by a 75 percent increase in electricity rates, credit card fees, bank fees, a minimum wage increase and many other ordinary operating cost increases.

“All we’re saying is let us exist in a free market. Because we have price controls, make an amendment to let us stay in business. It’s not like we’re saying give us $1 and we’ll figure out the rest. We’re saying give us a 7 percent margin increase, 4 percent more than the cost, which is about 28 cents to 30 cents per gallon,” Mr Jones continued.

“It will cost the average person on the road $5 more per week depending on their driving habits. It will not kill anyone, and will allow us to survive. All we’re saying is, Mr Prime Minister, the public will pay this. You have to make a decision. Costs will go up, and come down over time, but you need to adjust this so these business people can survive. That’s all we’re asking.”

The argument from the Association and its members is that the 54 cent per gallon gasoline margin, which was last increased in 2011, is no longer sufficient to cover multiple, significant cost hikes and enable them to stay in business by generating a profit.

Mr Jones yesterday said retailers “can live with” the switch to a percentage-based margin that he added the Government was considering earlier this year. “They gave us a proposal back in April and said here’s what we propose to do for you,” the Association president recalled. “We looked at it, told the membership it’s not what we want but it’s a start, so let’s move on.

“We went back and then, I don’t know. Maybe they got cold feet. They proposed to adjust the margin on a percentage. Our estimation was that, with fluctuations over a year, it would probably work out to a 25 cent per gallon increase. We’re probably one of the lowest in the Caribbean in fuel margins.”

Warning that several gas station operators are on the verge of shutting their businesses, Mr Jones said: “That’s all we’re asking: Let us survive. Not to make us rich, but to survive. Retailers are now scrambling to continue to purchase fuel and cover the cost of electricity. Now they’re having to go to BPL with post-dated cheques because it’s so out-of-whack.

“There are a number of retailers saying that, in a month, they will close the door and give the keys back to the wholesalers. The time for talking is over. We need the Government to take decisive action to give us some relief. We’re not advocating they give us their taxes. We need something to survive. That’s the message we have to get across to them. We understand their plight in not wanting to increase gas prices, but this is necessary for survival.”

Mr Halkitis yesterday again ruled out a margin increase that would raise gas prices for consumers. He also ruled out reducing the Government’s petroleum industry taxes, as to do so would create a revenue shortfall that 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,” the minister said. “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.