The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian petroleum retailers yesterday conceded their margin woes “cannot easily be fixed overnight” and promised “not to force the Government’s hand” with oil prices currently on track to reach $100 per barrel.

Vasco Bastian, the Bahamas Petroleum Retailers Association’s (BPRA) vice-president, told Tribune Business that negotiations with the Davis administration are “requiring more time than we had all anticipated” to reach a resolution but dealers were willing to be patient given the wider challenges that the country is facing.

With global oil prices forecast to soon reach $100 per barrel again, due to a combination of rising Chinese demand and production cuts by Saudi Arabia and Russia, two major producers, Bahamian petroleum retailers are once again faced with the prospect of having to pay an increasing amount to purchase their fuel inventories.

With the industry’s price-controlled fixed margin structure ensuring retail and wholesale margins do not change, regardless of pump prices, retailers often have to incur increased overdraft, credit card and other bank-related fees to cover the increased outlay on fuel inventories.

Mr Bastian, though, told this newspaper that retailers may adjust to these pressures by reducing the quantity of fuel they purchase so as to contain costs and avoid increased overdraft and other fees. “The current model is what it is. There’s nothing we can do,” he explained. “It’s a global trend. Oil prices are increasing all over the world as a result of the reduction in output by Saudi Arabia and Russia.

“It will definitely have an impact on the gas station dealers in The Bahamas. Our hands are already tied when it comes to that. It’s part of the business cycle in this industry. What goes up must come down. We have to watch what happens. Hopefully it will not rise too much and then will come back down.”

Oil prices last night, as Tribune Business went to press, stood at $92.19 per barrel on the West Texas Intermediate index and $94.50 for Brent Crude. Both showed slight increases, but global oil prices have increased by 30 percent since June 2023 as speculators and the markets react to the move by Russia/Saudi Arabia and increased Chinese demand.

These increases will eventually feed into the Bahamian economy through higher energy and transportation, fuelling fears of renewed inflationary pressures amid the ongoing cost of living crisis. “It definitely will require more cash to buy quantity of fuel we want,” Mr Bastian said of the impact for petroleum dealers. “But as the price of fuel increases the demand quantity reduces.

“Whereas a dealer previously, for example, bought 10,000 gallons of fuel they may now only buy 7,500. And from 7,500 gallons they could drop to 6,000 gallons. You can adjust the quantity as the cost goes up. We’ll have to make some adjustments from where we sit. That’s the best we can do in the circumstances.

“Our margin is fixed. This particular industry, like the food stores selling bread basket items, that margin is fixed. It’s a model that has been set for years, It’s one of those things we have to live with until we can do better. We have to do what we have to do. It’s just a tough period. It is what it is.”

Bahamian petroleum retailers have been seeking a 30 cent per gallon margin increase since April 2022. Based on the current 54 cents per gallon, that would take the margin to 84 cents, representing a 55.6 percent increase. In contrast, the Government earns a fixed $1.16 per gallon on all fuel sales plus 10 percent VAT, but Mr Bastian struck a conciliatory tone over the talks despite the seeming lack of progress towards a resolution all sides can live with.

“Our negotiations with the Government are ongoing,” he told Tribune Business. “Some negotiations require more time. The negotiations between the Bahamas Petroleum Retailers Association and the Government are requiring more time than we all anticipated. At the end of the day, the Government is committed to work with us to hopefully see a positive resolution.

“It’s tough all around right now. It’s tough for the Government particularly, it’s tough for the retailers particularly, and it’s tough for the wholesalers also. Collectively, hopefully in the future we can come together to make everybody happy. I understand the Government’s position. We all want this whole matter resolved, but it’s taking more time than we all anticipated.

“We understand the challenges the Government has, the challenges the retailers have, and the challenges the wholesalers have. It’s not something that can easily be fixed overnight. We all understand it’s a process. The current administration continues to work with us behind the scenes to try and bring some type of relief to the situation,” Mr Bastian continued.

“We don’t want to force their hand, and cannot force their hand. They’ve been very accommodating over the last several months. We’ve talked about various solutions, we’ve talked about various scenarios. I’m not going to bash them.”

Mr Bastian, asserting that he does not “want to make it political”, said the Government has been far more responsive to the petroleum retailers’ concerns than its Minnis administration predecessor when they were “sidelined and never received an audience”.

“We’d love a margin increase tonight, today, but we understand the challenges and are willing to wait for some reasonable agreement,” he told Tribune Business. “This government has been very accommodating to us in formal and informal talks. The fact we’ve been welcomed into the room speaks to their commitment to us.

“It’s just a matter of time. Sometimes negotiations take longer than both parties want. I’m hopeful in the very near future, or some time in the distant future if it’s not imminent, we get some resolution and all shake hands and walk away from the table happy. But we understand the challenges we have as a country.”