The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

FOCOL Holdings chairman last night signalled that the three oil majors will likely now push to increase their own gasoline and diesel margins “that have not changed in decades”.

Sir Franklyn Wilson, who heads the petroleum products supplier that operates under the Shell brand, told Tribune Business it was “worthy to note” that both his company as well as Esso and Rubis have not enjoyed an increase in their own gross profit margins for some 20 years.

Speaking after the Prime Minister confirmed his administration has granted petroleum retailers their long sought-after margin increase, he voiced optimism that “the Government will recognise” similar action is required further upstream in the industry’s supply chain.

And, in remarks that suggest Bahamian motorists and businesses may ultimately have to brace for further pump price rises, Sir Franklyn said it was only “fit and proper that there be some discussion” over petroleum wholesale margins although he gave no indication of what increase the oil majors may seek.

“I think the industry is having some conversations with the Government around that matter,” he confirmed to this newspaper. “It’s worthy to note that I don’t think wholesalers have had an increase in 20 years. On the diesel side I don’t think there’s been an increase for a very, very long time, and on the gasoline side.

“I myself have not been a part of industry discussions yet, but I’m sure our management team have. I’m sure at some point the Government will recognise that margins have not changed in decades. That’s a matter that will probably be discussed at some point.”

Wholesale petroleum margins presently stand at 33 cents per gallon of gasoline and around 18 cents on diesel. Asked about the impact of these inflexible, price-controlled margins remaining unchanged for so long, Sir Franklyn said: “Obviously, it’s not good news.” As for the industry’s sought-after increase, he added: “I have no idea but obviously it be fit and proper there be some discussion.”

Backing the upcoming margin increase for gas station operators, he added: “They’re business people, and we are pleased that they think they have a business that can be viable and continue. I think it’s in the interests of the country that all businesses operate for commercial reasons not out of a sense of despair.”

The three oil majors have made no secret of their desire for a margin increase as they are facing the same ever-escalating costs and profits squeeze that has impacted their retail customers post-COVID. 

Raymond Samuels, Rubis’ managing director for The Bahamas and Turks and Caicos, last year said “the regulated margin for wholesalers has been around for over 20 years” without any increase while the cost of doing business has risen significantly over the same period.

Speaking at the 10th anniversary celebrations for Rubis’ entry into the Bahamian petroleum market, when it acquired Texaco’s downstream business and assets, he said: “We under wholesale haven’t had any adjustment in our margin for over probably 20 years.

“It has been 33 cents per gallon on the gasoline, and 18 cents roughly on the diesel. As you know, the cost of doing business has certainly escalated over the years, not to mention the impact of COVID… The logistics costs we see, steel prices and so on going up, so our capital costs have gone up pretty significantly. So we hope at some stage there’ll be some kind of improvement to that margin.”

Mr Samuels added: “We certainly believe that the margin should keep pace with the cost of doing business, so it should be assessed and analysed over time to allow for investors like ourselves to really accomplish a reasonable return on investment.

“We really think that there needs to be a balance. Timing is important, of course, and we do understand the high price environment and customers certainly feeling the impact, so I think timing is going to be of the essence. But we do anticipate that at some stage we’ll have an assessment of the wholesale margin so we can have better alignment with the increase in the cost of doing business and return on investment.”

Meanwhile Raymond Jones, the Bahamas Petroleum Retailers Association’s (BPRA) president, yesterday told Tribune Business there are other industry-specific issues he and his members want to address beyond the forthcoming margin increases that they anticipate will take effect from October 1.

“There’s some other things we want to look at as an industry, look at rental and operating costs and things like that,” he explained. “That’s something we have to address with the wholesalers, looking at leases and the royalties we have to pay. That’s a topic for another ay.

“We’re working with the Government to make sure our employees, business operations and investors can survive. This [the margin increases] puts us in a position to be able to move forward, to be able to survive, cover our costs and go home.”

Mr Jones said the industry’s pricing structure, and moving away from price-controlled fixed margins to a percentage of the landed fuel cost, remains on the Association’s radar for future talks with the Government. “That’s something we’ve addressed before and something we’ll look at in the future,” he added.

“Going forward there’s a number of industry things that we have to look at, the audit for Business Licences, and things like that which affect our operating cost structure. We’ll continue to dialogue with the Government. They’ve been receptive to what we put on the table, and had that dialogue to find a mutually beneficial compromise to make an adjustment. It took a long time, but happy to say we got to that point.”

Michael Pintard, the Opposition’s leader, yesterday argued that the timing of the retail margin increase announcement was deliberately designed to head-off the industry’s planned protest before Parliament today - something the Government has succeeded in achieving. He argued that, instead, the Government should return more money to Bahamians and businesses by cutting its petroleum taxes.

“This has nothing to do with principle or a well-considered decision,” Mr Pintard argued. “The Government, in its typical way, has sought to avoid further embarrassment in its dealings with the business community and sought to head-off the protest by persons in the marina industry, because of the ill-advised taxes that the Government put on that sector, and the petroleum retailers.

“I think more Bahamians would rather see more money in the hands of residents and business persons rather than the Government... In our view, the Government should look very seriously at the composition of the revenue they are getting and give very strong consideration to a cut in that direction. At the end of the day, we want the money in the pockets of Bahamian consumers inclusive of struggling businesses.”