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
tribune242


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

tribune242

Caribbean Blog International

Two years of high unemployment and tepid economic growth means that Bahamian consumers are less able to absorb the spike in gas prices and its effects

Conserving energy

thenassauguardian editorial



If you have had to fuel up at the gas pump over the last week or so, you have probably noticed that gasoline prices are rapidly on the rise.

A gallon of gas is already over the $5.20 mark in New Providence and over the $6 mark in the Family Islands, and summer’s not even here yet.

U.S. and international energy officials have warned that oil prices — already topping $100 per barrel — will only continue to climb due to volatile conditions in the Middle East and ongoing pressure on world food prices.

Some predict that prices at the local pumps will hit the $6 per gallon mark as the temperature continues to rise.

For residents of the Family Islands the situation is even more disconcerting. Most have longer distances to drive in the well-spread out settlements, and with maybe the exception of Abaco, most of those communities have lower income levels.

Higher gas prices in a country like The Bahamas that depends on imports to survive means higher electricity and food bills — and just about higher everything else.

Higher gas prices will also take dollars away from people who have already had to become accustomed to living with less as the economy struggles to recover from a deep global economic recession.

Two years of high unemployment and tepid economic growth means that consumers are less able to absorb the spike in gas prices and its effects.

The airlines that bring in our tourists who support our major economic pillar will no doubt be looking to raise their fares to compensate for the higher fuel prices.

This could mean that fewer people dreaming of a vacation in The Bahamas may have to shelve plans, again, because of higher ticket prices.

It would be a shame if high gas prices put a brake on the fragile economic recovery.

The most recent figures from the Department of Statistics show that the average retail price of gasoline and diesel rose by 23.8 percent and by 14.1 percent. The Bahamas Electricity Corporation’s average fuel surcharge has also increased by 36.8 percent.

It’s a situation that the government is monitoring very closely. Not only do high gas prices present obvious implications for domestic gasoline, electricity and food prices, but it also impacts the government’s fiscal position and the broader economy.

“As necessary, the government, the private sector and consumers will need to implement appropriate conservation measures to minimize the impact,” Prime Minister Hubert Ingraham said recently.

The government has launched a national energy efficiency program, and has completed an energy audit of some of its buildings and facilities, and plans to implement the recommendations of that report. As a part of the program, 270,000 Compact Florescent Lightbulbs will be distributed nationwide over the next two months.

What else can be done to soften the impact of the blow that higher oil prices will deliver to our economy?

What is the status of the implementation of the National Energy Policy’s recommendations on how a more sustainable energy mix could be attained in The Bahamas to reduce the country’s almost 100 percent reliance on oil imports?

The government should implement sooner rather than later a detailed energy plan which should include some basic elements that could be introduced fairly rapidly to help the public meet the challenge of skyrocketing energy prices.

One step forward in this regard could be the improvement to the public transportation system to make it more reliable and accessible to a larger number of users.

Individuals must also do their part to conserve energy, such as car-pooling and making sure that fans, lights and TVs are turned off when not in use.

4/7/2011

thenassauguardian editorial

Bahamas Blog International

The Adversarial Relationship Between The Multinational Oil Companies and The Government of The Bahamas

The Local Oil Companies in The Bahamas are Brazenly Attempting to Manipulate Public Pressure on The Bahamian Government for Further Increases

Consumers and oil and gas prices

By Charles Fawkes

Nassau, The Bahamas

HOUSE OF LABOUR: The price of oil and gas will continue to remain high in the coming months because the oil companies locally and on the international scene will continue to manipulate the oil market- (whether it be because of the war in Iraq or whatever)- creating artificial shortages in order to "jack up" prices to make huge profits.

They will blame ravenous global demands and petroleum producers' reluctance to boost supplies.  They will also blame security problems in Saudi Arabia and Iraq claiming that these problems have inflamed the market.  They will also blame the Organisation of Petroleum Exporting Countries (OPEC) and any event they can latch on to.

Recently, June delivery for crude oil rose 77 cents on the New York mercantile exchange to $38.98 per barrel, a new 13-year high, while unleaded gasoline for June delivery gained 4.4 cents to $1.31 per gallon, the highest settlement since the contract started trading in December 1984.  June heating oil climbed 2.02 cents to settle at 98.81 cents per gallon.  Natural gas futures climbed 3.8 cents to settle at $6.269 per 1,000 cubic feet.  Increases in oil and gasoline futures typically cause pump prices to rise.  Refineries are running flat out ahead of the peak summer driving season, but costlier crude makes it more expensive for them to produce gasoline.  The average price of regular unleaded gasoline in the United States is $1.84 per gallon, according to the Energy Department, and analysts say the cost could rise as high as $3 per gallon in some regional markets.

Additionally, contracts of North Sea Brent crude for June delivery soared by $1.30 to $35.78 per barrel in late trading on London's International Petroleum Exchange.  Markets rose after the U.S. ambassador to Saudi Arabia, the world's No.1 oil exporter, advised Americans to leave the country following the killings of five foreign workers at a petrochemical plant there.

The Organisation of Petroleum Exporting Countries, which pumps one- third of the world's oil, has reaped a windfall from higher crude prices.  OPEC insists that it aims for an average target price of $25 per barrel for its benchmark blend of crude, but the actual benchmark stood 37 per cent higher than this at $34.13 on Monday, May 17, the most recent day for which OPEC complied data.  OPEC blames high prices largely on speculators and political tensions in the Middle East.

Locally, gas prices in January stood $2.93 per gallon. With the current manipulation of the market this could rise to $3.30 in Nassau and as high as $3.42 in the family islands

The price of no other commodity is as directly and critically linked to the cost of living as the price of petroleum products, especially gasoline and diesel oil.  So much so that the present struggle of the multinational petroleum companies in The Bahamas, for hefty increases in gas prices, begs a historical perspective and review.

Until the 1960’s, the industrialised countries had a cheap and plentiful source of oil from their former colonial territory until these, now independent, countries became wise as to the degree their most valuable resource, oil was being exploited.

In 1960, 13 of these oil-producing nations who depended largely on oil exports for their income and trade got together and formed the Organisation of Petroleum Exporting Countries (OPEC).  The members of this organisation supplies about 85 per cent of the oil imported by non-member nations and have a major influence on the petroleum industry globally.

Among other things, the organisation influences prices and set production quotas for its members to maintain their desired per barrel of oil.  Over night the price of a barrel of oil went from a couple of dollars to as much as $50 per barrel and now fluctuates around $12-$15 per barrel depending on the grade.

Those of us old enough can remember this economic shockwave felt globally by this sudden increase in the price of oil.  Many small nations' economies virtually collapsed - a disaster from which many will never fully recover.  There were severe shortages of gas worldwide and its price skyrocketed.  This was also accompanied by sharp increases in the process for all other goods and services. The cost of living also went through the roof.

In The Bahamas, we have vivid memories of the gas shortage at the time and the long lines at the stations when gas was available.  The sharp increase in the price of gas was only held partially in check by the then government, which instituted controls on its price.

This was the beginning of the adversarial relationship that exists between the multinational oil companies and the government in The Bahamas.  The companies want to extract as much as they can from the Bahamian consumer and the government, exercising controls, should be protecting the consumer from their exploitation.

The oil crisis of the 60's offered the perfect environment for the multinational oil companies like British Petroleum, ESSO, Shell and Texaco, etc., to demonstrate their greed.  We must remember that even though the members of the OPEC demanded a fairer price for their oil, they lacked technical skills and experience to extract the oil, refine it and market it.  So they were forced to rely on the multinational oil companies for their expertise.  The multinationals became, in fact, the middlemen.

The oil companies seized this opportunity to manipulate the oil market creating artificial shortages and hiking up the price in order to make huge profits.  To divert attention from their activities, they used their unlimited public relations resources and their government influence to shift the blame to OPEC.  The result was billions of dollars in windfall profits for the oil companies.  Even a nation as powerful and sophisticated as the Untied States finds the multinational oil companies formidable foes to regulate and control.  The tactics they have used in The Bahamas in recent months to extract increases in the price of gas, demonstrated that they have not changed in character.  As small and relatively unsophisticated as we are, compared to the United States, what chance do we have against them?

The local oil companies are brazenly attempting to manipulate public pressure on the government for further increases.  The pressure being applied is close to blackmail.  They may even threaten to cut back on their inventory of gasoline and diesel oil, which would create an artificial shortage on the islands.

The stakes are high for the Bahamian worker because the level of his quality of life is threatened.  The Ministry of Trade and Industry, although, granting the recent request for increase have in the past insisted that the companies absorb some of the increased cost in their 33 and 44 cents margins.  According to the Nassau Guardian, Minister Leslie Miller also suggested that both petroleum distributors and retailers being absorbing some of their increased costs in the 33 and 44 cents respective margins enjoyed by each.

"What we are trying to tell them is instead of putting all this in the Bahamian people, with their 33 cents and 44 cents, it's time they take some hits," he said.  "Your margins will get cut down in half anyhow.  Thank God you have these margins still in place for the next month come June they will be dealt with."

Consumers in the meantime are waiting anxiously to see if Minister miller can reduce the prices of gas as he has promised to do with the setting up of a National Energy Corporation and the purchase of supplies from some regional oil producers.

Charles Fawkes is the President of the National Consumer Association and organiser for the Commonwealth Group of Unions, Inside Labour columnist for the Bahama Journal, Editor of the Headline News, The Consumerguard and the Worker's Vanguard