The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Government was yesterday said to be “definitely considering” reducing the cost of price-controlled liquefied petroleum gas (LPG) or cooking gas, amid dealer concerns that such action makes no sense.

E. J. Bowe, the Price Control Commission’s chairman, confirmed to Tribune Business that the organisation was set to meet today to develop “recommendations” for reducing LPG costs.

The move is in response to a 67 per cent fall in spot LPG prices on the world and US markets. Based on the Mont Belvieu index, LPG per gallon prices have fallen from $1.695 on February 10 last year to $0.56 per gallon on Monday.

Several observers have complained to Tribune Business in recent days that despite this substantial decrease, the Government has so far done nothing to pass these savings on to Bahamian consumers, even though LPG is price controlled.

“The price has gone down substantially in the last eight months, but there’s not been a reduction in price to the general populace,” one source told this newspaper. “Central government has done nothing with LPG prices here.

“It’s something the general population should be benefiting from, the drop in price.”

Shane Gibson, minister of labour and national insurance, who has responsibility for price control, confirmed that the Government was considering adjustments.

In a brief interview with Tribune Business, he said: “We are definitely considering that. Due to the fact that fuel prices have dropped so much, the cost of propane has significantly reduced.

“We don’t mind suppliers actually increasing their  revenue as a result of that, but we also want the consumers to benefit as well. Right now all the savings are being passed on to the suppliers.

“We are going through the consultative process with all the stakeholders. We will let them know what we are thinking and  make a final decision after all of the meetings.”

  LPG propane is created from a mix of crude oil, butane and gasoline

Mr Bowe told Tribune Business that the Price Control Commission is set to meet today to make recommendations that will ultimately lead to the lowering of LPG costs in the Bahamas.

“The price of oil has been falling for quite some time. We  are able to see it at the gas pump, but we haven’t seen it with respect to the cooking gas, the LPG, and so we are making recommendations for consideration for that to go down a bit,” Mr Bowe told Tribune Business.

“I am unable to say any more than that until the Commission meets. Once we meet then we will send recommendations out to the minster responsible for consumer protection, and then he in turn, if he agrees, will  take it to Cabinet. That is the procedure.”

 One LPG dealer told Tribune Business yesterday: “There is nothing we can do because government controls the price of LP gas. We can’t carry the price up or down, so whatever they say we go with that.

“Right now, a tank of gas is $100 plus the 7.5 per cent for VAT. We don’t control the gas prices. Even when the people who sell gasoline at the pumps, they could go up and down, we can’t do it. We have to wait for the consumer affairs.”

Another dealer, who happens to be an ex-Cabinet minster and MP, said LPG prices in the Bahamas had not decreased in line with global prices due to the Government increasing taxes.

Tennyson Wells argued that reducing dealer mark-ups now made no sense given that global oil prices would likely rise over the next several months.

Mr Wells, a  major shareholder in Caribbean Gas Ltd, said that while the price of propane has gone down, Government tax increases have effectively eliminated those savings.

“The price of the product has gone down but the Government has doubled the price on the duty, and then they charge you VAT on the first cost of the product, the transportation cost and VAT on the duty,” he explained.

“At the end of the day, the importers are right back to where the price of the fuel was last year June. They doubled the cost of the duty, they took the duty from $0.20 per gallon to $0.40 per gallon and they charge you VAT on the duty that you pay, which is tax on a  tax. They charge you on the freight and the first cost of the product. Of course we will get the VAT back, but it’s a cost on the consumer.”.

Mr Wells added: “In a few months, when the price of the product goes back up, the importers of propane will be losing money with the duty the way it is now, and the tax on a  tax. The consumer will have to pay all of that at the end of the day.

“I thought that when the price of oil went down, the importers would make a few dollars, but the Government basically wiped that out. I don’t really know if they are thinking about what they are doing. There is no point in interfering with the cost of gas, diesel, propane and those things at this stage because two months from now you’re probably right back to where you were.

“In a few months, gas could be back up to $80 a barrel. When you get up to $90 a barrel, then you’re losing money. Propane is a price-controlled product. When you take the Government’s 100 per increase on duty you aren’t saving anything at all,” said Mr Wells.

“I don’t think that there would be any extra margin for the importers within the next month to month and a half. I think when they look at it they would appreciate what’s really going on. I don’t think anyone has really sat down and said what the numbers are. I haven’t done so in any great detail, but I know that despite the drop in the cost, with VAT and the duty, the savings that you had on the first costs was wiped out.”

Mr Wells was backed by Superwash’s president, Dionisio D’Aguilar, a major user of LPG at his laundromat chain.

While global prices had come down, Mr D’Aguilar said they would not be reduced by the same magnitude in the Bahamas, due to the Government’s taxes in combination with shipping, trucking and storage costs.

“There’s no doubt the price has come down,” he added. “The spot price has come down significantly. That’s the price we all use in the Bahamas to price propane.”