The Tribune

• Several ‘unable to survive’ longer than two months

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Petroleum Retailers Association’s (BPRA) president yesterday asserted that the industry is “not easing up” on demands for a margin increase with several dealer “unable to survive” more than another two months.

Raymond Jones, contradicting Vasco Bastian, his vice-president, told Tribune Business that a margin increase has become even more “urgent” with global oil prices forecast to soon hit $100 per barrel as this will impose further pressure on already-heightened costs that have effectively wiped out petroleum retail profits.

With gas station operators stuck with the same price-controlled fixed margins regardless of fuel prices, he warned that many were “keeping the doors open because we have too much invested to say the hell with it” by closing down. Besides the increasing cost of purchasing fuel inventories due to rising oil prices, which will likely see retailers incur greater overdraft, credit card and bank fees, the industry has also been hit by Bahamas Power & Light’s (BPL) soaring electricity bills.

While other industries can adjust their prices to cover these costs, petroleum retailers cannot, and Mr Jones told this newspaper that a margin increase of around 20-25 cents per gallon of gasoline is now critical if the Government “wants us to survive in a price-controlled environment”. He added, though, that the Association and its members are open to a phased implementation of such a rise, rather than a one-time increase, to ease the burden on motorists.

“The retailers are not easing up. That’s not the case,” Mr Jones reiterated. “We cannot ease up. Like everything else, the Government takes positions on different things. We understand they’re probably not inclined to do something, but we’re not going to stop. We’re not going to take a break. I was there [at the Ministry of Finance] today, and had a brief chat with a representative of the Government on the need to find a solution to this on an urgent basis.

“We’re not easing up. Inflation and global pressures are pushing everything up. We cannot wait for a good time. When the price of oil went down, they didn’t move, and now it’s going up they will say they can’t do anything.” The Davis administration, largely via Michael Halkitis, minister of economic affairs, has made clear it will not approve a margin increase because this will impose a cost increase on all Bahamians at a time of heightened inflation.

Now, 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, 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 as a result to cover the increased outlay on fuel inventories.

Mr Jones, pointing out that banks typically charge a 1 percent fee on any transaction over $10,000, said: “We continue to pay these extra fees. All it does is further erode that 54 cent margin that is already being eroded. We cannot ease up. This is the time we have to push to survive.”

While petroleum dealers, like all other industries, have had to contend with the 70 percent increase in total BPL rates since October 2022 as the utility seeks to recoup prior fuel cost under-recovery, Mr Jones said his sector’s price-controlled fixed margins mean it cannot follow others in adjusting prices to maintain profitability. As a result, the higher light bills have combined with other factors such as the minimum wage rise and greater NIB contributions, to squeeze margins.

“On top of that, with the price of fuel going up, the VAT [on gasoline sales] goes up so the Government is making more money while we’re making less,” he added. “We have to keep the pressure up. We want a regime change in the rate; to get a rate increase. We’re talking 20 cents, 25 cents per gallon. It’s not significant, but it will do a lot for retailers.

“We don’t want to be a force attacking the Government but we have to engage them and need a resolution now. We cannot wait. If you want us to survive in a price-controlled environment, you have to increase the margins. If not, then you will have a number of retailers out of business in another two months.”

Asked whether the Association’s members had informed him of such an outcome, he replied: “Yes. We cannot afford to keep carrying higher costs. Credit card fees on $6, that’s between 12 cents and 14 cents per gallon per transaction. You cannot negotiate that. That’s your fee.

“They give you what is left in this environment. No one is going to go backward and say you have to pay by credit card because digital transactions are the direction the global economy is going in. The pressure is back on, and even more so.”

Oil prices last night, as Tribune Business went to press, had eased slightly compared to earlier this week, standing at $90.45 per barrel on the West Texas Intermediate index and $93.52 for Brent Crude. 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.

Bahamian petroleum retailers had previously 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.

Asked about the pressures on the current 54-cent margin, Mr Jones replied: “We’re at the point where it’s basically gone. There is no profitability. You’re keeping the doors open because you have too much invested to say: ‘The hell with it.’ If you stop you’ve got more to lose than if you keep pushing to find innovative ways to improve.

“We’re stuck. We cannot adjust our margins to reflect the actual reality. We’ll not be at war with the Government, but we have to continue the dialogue with the Government to make them understand our plight. There’s no easing up because the margin is not increasing. We continue to talk to them and find ways to implement. We can do it in small increases at a time, but it has to get done.”