Thursday, May 25, 2023
By YOURI KEMP
Tribune Business Reporter
The Prime Minister yesterday said his "technical team" is working on a resolution to the petroleum dealers' margin increase demands as many continued the halt to diesel sales for a third day.
Speaking briefly to Tribune Business during a break in the House of Assembly debate, Philip Davis KC said of the action taken by gas station operators: “They decided to do what they wanted to do, and it’s their business that they are impacting. Hopefully they will understand what it is to conduct business in environments such as this.”
Meanwhile, Vasco Bastian, the Bahamas Petroleum Retailers Association's (BPRA) vice-president, told Tribune Business he is hoping the halt to diesel sales will "not be much longer". He added: “We haven’t had any discussions with the Prime Minister, but we await communications with him, however, and we hope his office will reach out to us shortly.”
Not all petroleum dealers have halted diesel sales. Multiple Shell service stations, which are owned and operated by the wholesale supplier, BISX-listed FOCOL Holdings, have continued to provide a vital lifeline to jitney drivers, taxi operators, truck drivers and industries such as construction - all of which rely heavily on diesel - by continuing to make the fuel available.
Mr Bastian addressed this “breaking of ranks” by the Shell branded stations, saying: “The Shell situation is a very complicated one, and that is an opportunity for a discussion at another time.”
"I’m not sure if the public is aware of the model that Shell currently operates, and it is different from the model that other wholesalers in this country operate, so that needs to be addressed in a separate issue by the BPRA as well as the Government itself.”
With diesel prices up 12 percent for the year to end-March, based on Bahamas National Statistical Institute (BNSI) data, gas station operators are incurring significant overdraft and credit card fees to purchase diesel supplies at the front end but earning only "a few pennies" in return.
Diesel margins are 34 cents per gallon, compared to 54 cents on gasoline, and many gas station operators have halted sales of the former fuel in a bid to both cut costs and try and force a decision from the Government over increasing their price-controlled fixed margins - an issue the two sides have been locked in negotiations over for more than a year.
The last margin increase enjoyed by gas station operators occurred in 2011, some 12 years ago under the last Ingraham administration. That took gasoline margins from 44 cents per gallon to 54 cents, where it has remained ever since, while diesel stands at 34 cents per gallon. However, operating costs and inflationary pressures have increased substantially then, especially amid the post-COVID cost of living crisis.
As a result, dealers are arguing that the present price-controlled fixed margins are insufficient to enable them to cover their operating costs and break even, let alone make a profit. Besides facing an up to 163 percent increase in Bahamas Power & Light (BPL) fuel charges amid peak summer consumption, station operators also have to pay rent, franchise and other fees to their wholesale landlords, as well as contend with a 15 percent increase in insurance costs.
Raymond Jones, the Bahamas Petroleum Retailers Association's (BPRA) president, told this newspaper earlier this week that, with many gas station employees paid at minimum wage, the 24 percent or $50 per week increase implemented from New Year's Day has had to be covered by operators without any increase in their margins. And the increased wage bill has also led to a matching increase in National Insurance Board (NIB) contributions.
These combined cost increases, together with the absence of any margin increase, has pushed many retailers to breaking point with some in a position where it would be "cheaper to close" than continue operating. As a result, Mr Jones said the Association and its members had been left with little choice but to act accordingly.
"We're very mindful of the consumers we serve. We don't want to disenfranchise them in any sort of way," Mr Jones told Tribune Business. "But we're not running a charity. We're not social services. Because we're price controlled by the Government we need them to... make the adjustment" to the fixed margins.
Noting that BPL and virtually all other businesses and industries have been able to adjust prices to cope with rising costs, but not the petroleum sector, he added of the diesel halt: "We'll take this as what we consider a measured action and, at some point, if we don't have the ability to sit down and come to a conclusion, we will have to increase the effect of what we do.
"This will go on until such time as we have a meeting of the minds, and come to a conclusion. I don't think we need to be negotiating any more. We've exchanged ideas and proposals. We were right at the door [of an agreement], but we need to sign it, put it in writing and sign off on it, discuss the implementation and let's go.
"It's just a question of the Government sitting down and saying: 'Right, here's what we propose and here's how we do it. Here's the implementation plan'. We say: 'Thank you very much. You've been very generous. Let's go. Let's get back to work and let the public drive'. There's a holiday weekend coming up and we want people to be driving, but we need to get some semblance of an agreement as opposed to continuing the dialogue," Mr Jones continued.
"In no way are we trying to threaten the public or the Government or anyone else. Many of the staff employed by gas stations got that 24 percent minimum wage increase. We're saying: 'Please give us a chance to offset this so we can sleep at night, pay our bills, pay VAT, pay national insurance.
"The petroleum retailers are resolute. We will stay this course as we need to come to an agreement, come to a conclusion, let us get back to work and keep everyone employed. There is no intent to disenfranchise the motoring public, our customers, because we depend on them, but we have to conclude this so we can move on. We're losing money by not selling diesel, giving up some revenue again, although it's only pennies."
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