Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chairman Winston Rolle says: ...any increase in pump gasoline prices could not be coming at a worse time, since it could further depress prospects for a Bahamian economic recovery

Chamber chief: Gas mark-up increase 'very concerning'

By NEIL HARTNELL
Tribune Business Editor
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The Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) newly-elected chairman has described as "very concerning" the impending mark-up increases for petroleum retailers, warning that it would hit consumers and increase "the cost of doing business".

While expressing sympathy for the plight of Bahamas Petroleum Retailers Association (BPRA) members, Winston Rolle indicated to Tribune Business that any increase in pump gasoline prices could not be coming at a worse time, since it could further depress prospects for a Bahamian economic recovery.

Responding to this newspaper's Friday report on the Government agreeing to an increase in the per gallon gasoline and diesel mark-ups for petroleum retailers, Mr Rolle said this would only further increase business and consumer costs at a time - the summer - when global oil prices traditionally peaked, compounding the effects.

"That's very concerning," Mr Rolle said of the Government's decision. "While I understand the plight of the operators and their profit margins, you can appreciate the impact that is going to have on the cost of doing business. With gasoline prices increasing, costs are going to go much higher."

Apart from Bahamian consumers, who will feel the impact in their bank balances and disposable income levels, others likely to be heavily impacted are transportation-dependent businesses such as taxi drivers, jitneys, tour operators and all companies that rely on making daily deliveries - such as wholesalers.

"What most persons had hoped, and I guess the Petroleum Retailers Association had hoped, was that the Government would relax some of their tax take and give them the spread they need," Mr Rolle added, "but not impact the overall cost to the consumer."

Earl Deveaux, minister of the environment, on Thursday last week indicated that the Government had agreed to lobbying by the BPRA and Marina Operators of the Bahamas (MoB) for an increase in the fixed margins they can charge per gallon of gas and diesel sold.

No details were provided, but there were indications the increase would take effect within the next month. The change is also likely to see an increase in the existing margins, which are $0.44 per gallon of gasoline and $0.19 per gallon of diesel, rather than a percentage increase that the BPRA and MoB had pushed for.

Whether the increases are of the amount sought by the BPRA is also unclear. Another unknown is whether the wholesale margin enjoyed by the oil companies, FOCOL, Esso and Texaco, which are currently pegged at $0.33 per gallon will also be increased. Noting that "we haven't really hit the summer months yet", a time when global oil prices traditionally peaked, Mr Rolle added: "It's very concerning because you're going to have an increase through the adjustment made by the Government and, on top of that, in the coming months we'll see another increase based on the cost of oil worldwide.

"We're very sympathetic and do not want to put anyone's business in jeopardy, but the hope would have been that the retailers and government worked out some middle of the road, where no one takes a substantial loss. Right now, all of this is going to fall on the consumer."

Given that almost two-thirds of Bahamian economic activity stems from consumer spending, that is worrying in and of itself.

One business executive, speaking to Tribune Business on condition of anonymity, agreed with Mr Rolle that the move would "increase the cost of living to the consumer", describing it as "just another band aid approach".

Ultimately, the source said, without fixing the existing pricing structure this situation would eventually arise again, with BPRA members clamouring for further margin increases further down the line. Gas margins were last increased under the first FNM government, the source said, yet almost 10 years later the Bahamas was here again, and with the same arguments being made.

Gas prices were already extremely high, and the Government's decision meant they were likely to go higher on the grounds that dealers needed more money.

"You have to go back and look at this system that doesn't make sense at all," the source said. "If you don't solve the problem correctly, in a couple of years you're going to do the same thing."

The solution, the source said, was for the Government to reduce its $1.06 per gallon tax, plus 7 per cent Stamp Duty on the cost of landed fuel, something it is unlikely to do when desperate for every cent of revenue. The other issue, they added, was the rents, royalties and franchise fees levied on the BPRA and its members by the oil companies. The source identified these and the Government taxes as the major problem, together with an over-supply of service stations.

"When you look at the amount of service stations per square mile in Nassau, you've got more than in Florida. Something's got to be fundamentally wrong there," the source said, suggesting there needed to be consolidation.

"For an island 21x7, we should not have so many service stations in close proximity. That's the only way to begin to drive costs down for Bahamian consumers."

Rick Lowe, a leading executive with the Nassau Institute economic think-tank, told Tribune Business the episode showed price controls "certainly belong in the dustbin of history. The market is the market, and you can restrict it, manipulate it and put people out of business, but sooner or later reality has to come".

July 04, 2011

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