The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian petroleum retailers yesterday voiced fears that full Business Licence audits will be “just another nail in the coffin” as they push to meet with the Prime Minister over demands for a margin increase.

Raymond Jones, the Bahamas Petroleum Retailers Association’s (BPRA) president, told Tribune Business that requiring gas station operators to produce full audited financial statements will heap additional costs on an industry whose price controlled fixed margins have been “totally decimated” by inflation and multiple cost increases over the past decade.

With fixed gasoline and diesel margins preventing petroleum dealers from adjusting prices to cover the extra audit costs, he argued that the enhanced Business Licence verification exercise “doesn’t make sense” and is unnecessary given that the sector’s top-line revenues “are so easily traced” back to the volume of fuel operators buy from their respective wholesale suppliers.

As high turnover/low margin businesses, Mr Jones told this newspaper that most gas stations will exceed the $5m annual turnover threshold above which companies must produce audited financial statements to verify the accuracy of their Business Licence returns. The sector’s fixed gasoline and diesel margins, he reiterated, mean that the extra audit expense cannot be passed on to consumers.

“The Department of Inland Revenue has mentioned they are going to require an audit to be done on revenues over $5m, which is pretty much a lot of the gas stations, even though the margins and gross margins are not even close,” the Association president charged. “It’s just another nail in the coffin of petroleum retailers.

“You’re selling two products [gasoline and diesel], and the numbers are easily verifiable from the wholesalers. The Department of Inland Revenue also has its own audit functions. I don’t see why a further cost is being added for an auditor to come in and look at numbers that are so easily traced. It doesn’t make sense.

“When the Prime Minister says he does not want to add costs on to poor people, we are poor people when we can’t control our business because of the margins that are controlled by the Government. That needs to change in the sense that the Government needs to recognise, and I believe they do recognise, the issues,” Mr Jones continued.

“We need action to adjust the margins. Everything else is going up. We are an industry that needs help. We employ hundreds of Bahamians, and need immediate assistance in changing the margins. We understand the Government’s desire to protect consumers, but it’s got to change.” Gas stations, though, do sell more than just fuel due to their convenience stores and other amenities they provide.

But the long-standing argument from the Association and its members is that the 54 cent per gallon gasoline margin, which was last increased in 2011, and the 33 cents per gallon that they receive on diesel is no longer sufficient to cover multiple, significant cost hikes and enable them to stay in business by generating a profit.

Michael Halkitis, minister of economic affairs, has frequently articulated again the Davis administration’s position that it will not agree to any solution that increases gas pump prices for Bahamian motorists - thus appearing to rule-out any margin increase for gas station operators.

However, Mr Jones and the Association have indicated that protecting consumers could come at the cost of losing multiple Bahamian entrepreneurs and the jobs they provide if petroleum dealers are unable to survive financially as a result of expenses consistently exceeding the margins they earn. Such an outcome could be disruptive to motorists when it comes to accessing fuel.

Mr Jones yesterday disclosed that the Association has formally requested a meeting with Prime Minister Philip Davis in a bid to resolve a saga that, come Easter 2024, will have dragged on for two years. “We;re looking forward, within the next week hopefully, to sitting down with him and finalising this and bringing an end to what I call the financial fiasco that has been plaguing the industry,” he told Tribune Business.

“We have sent in a formal request for a meeting before Christmas and are waiting to hear back on that. We’ll reach out tomorrow [today], and see when we can get a date for a meeting. It’s way beyond urgent. Basically the ship is sinking, and we need the coastguard, which is the Government of The Bahamas and the Prime Minister in this case, to make the final call: This is what we can do.

“We had previously heard a public statement by the Prime Minister that they were going to address this issue this year, but we’re hoping it will be in January and not later on, because in three months it will make a year since the Government actually gave us a proposal which we accepted. We accepted that proposal and everything got quiet after that,” Mr Jones added.

“There was a lot of discussion but nothing that translated into action for us to get an increase. People now have Business Licence fees coming up. We got a proposal from the Government and we will try and move ahead with the proposal you presented to us so we can put this whole issue to bed. I’m hoping in the next couple of days we’ll get a confirmed meeting with the Prime Minister for some time next week.”

Mr Jones said the Government’s proposal, which the Association and its members were ready to accept, “gave us about 30 cents more a gallon in margin”. It also involved moving from a fixed to a percentage-based margin, based on the cost at which retailers bought fuel from their suppliers, meaning that it drops when gas prices fall and increases when they rise.

However, to protect the interests of all parties, Mr Jones said the Association and its members had suggested setting both “a floor” and a “ceiling at the top end as well”. The latter would safeguard consumers against gas prices going sky high.

“We’re still within a reasonable number with regard to the fuel margin and within the consideration of our customers,” he added. “We want the motoring public to enjoy driving and don’t want any impact on volumes because of unreasonable margin costs.

“What we’ve been asking for is 30 cents a gallon. It’s not been increased in 12 years. Costs have gone up way beyond that. That has totally eroded the margin for gas station operators. That 54 cents has been totally decimated. We’re like a broken record saying that, but something has to change.”

Mr Jones also called for the petroleum industry’s margins to be assessed on an annual basis, with any change linked to inflation and the cost of living as measured by either the US or Bahamian consumer price indices.

“We shouldn’t wait 10-12 years for a review of the margins in an industry,” he added. “We should be looking at the cost of operating, inflation and adjusting every time it goes up and down similar to changes in the US and Bahamian consumer price index.”

A 30 cent per gallon margin, based on the current 54 cents per gallon, 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. In total, the Government gets roughly $1.70 out of every gallon of gas.

Besides the higher cost of purchasing fuel inventories due to high oil prices, which has seen retailers incur greater overdraft, credit card and bank fees, the industry has also been hit by Bahamas Power & Light’s (BPL) soaring electricity bills. This has combined with other factors such as the minimum wage rise, greater NIB contributions, and rising insurance and security costs to further squeeze fixed margins.