• Nassau residents told: ‘Fill up at station of choice’
• Sir Franklyn: Society owes them ‘debt of gratitude’
• Calls for small margin rise ‘in right circumstances’
By NEIL HARTNELL
Tribune Business Editor
The Government was yesterday urged to give gas station operators some reward for letting “common sense prevail”, as the industry pledged “there’ll be no shut down on this island” over the Easter weekend.
Vasco Bastian, the Bahamas Petroleum Dealers Association’s vice-president, told Tribune Business that New Providence residents and businesses will be able to “fill up their vehicles at the station of their choice” as normal following yesterday’s meeting with the Government that was called to discuss the increasing hardship faced by some operators.
Declining to comment on the discussions, or the meeting’s outcome, Mr Bastian would only say: “There’ll be absolutely no shut down on this island. Everything is normal. Everything is normal. People can go ahead and fill up their vehicles at the station of their choice. There’ll be absolutely no shut down. You can put it on the front page. There’ll be absolutely no shut down. People can go on with their lives.”
Senator Michael Halkitis, minister of economic affairs, could not be reached for comment on the meeting before press time last night. However, the prospect of an island-wide gas station shut down had begun to look increasingly unlikely, not least because it would negatively impact the dealers themselves, as well as the country, with the minister on Tuesday affirming that the sector’s letter to the Government made no mention of any type of industry-wide action.
Still, Sir Franklyn Wilson, the FOCOL Holdings chairman, yesterday argued that the Government should reward gas station operators for their “prudent judgment” by giving them a small increase on their present 54 cent per gallon fixed margin “as soon as circumstances allow”. This means that the timing of any increase should occur when oil market volatility has ended, and lower fuel prices prevail, as well as the economy being more advanced in post-COVID recovery.
“Common sense prevailed,” Sir Franklyn said, when informed of Mr Bastian’s comments. “The fact that the dealers exercised good judgment is something that I think the whole country should celebrate and thank them for. I don’t mean that the price is not heavy for them, or that the cause was not reasonable, but at the end of the day they made a prudent judgment in their own interests and that of the country.
“For others who have grievances from time to time, it’s great to say my interests, my industry’s interests, my private interests, and say they will raise hell, break things up and do whatever it is, but sometimes you have to take another look and, to the extent the dealers took another look, society owes them a debt of gratitude.”
The head of the BISX-listed Shell distributor, though, conceded that the underlying issues behind the threatened shut down have not gone away. The root cause is the industry’s price-controlled, fixed margin structure for both retailers and wholesalers that makes the sector a volume-driven business unable to respond appropriately to spiking global oil prices and market-driven volatility outside its control.
“They have not gone away,” Sir Franklyn admitted of the Bahamian petroleum industry’s woes. “This is not the first time. They have not gone away. Because of the way things are structured, they are likely to reoccur. That’s the way they are. It’s the nature of our economy and how our political leaders manage that economy. That’s the way it is.”
Pointing out that the grievances raised by gas station dealers were not normally heard when fuel prices were low, and oil markets stable, he added that it was “inevitable” they will resurface in the future when conditions resemble those in play today. “The way the industry is managed by the Government, that’s the issue,” Sir Franklyn said. “When fuel prices spike, these are the consequences. That’s inevitable.”
A 50 percent margin increase, which would have raised the per gallon mark-up for retailers from 54 cents presently to 81 cents, as well as switching the basis for its calculation to a percentage from a fixed amount, were among the key demands from gas station operators. However, Mr Halkitis effectively shut this down before the meeting when he branded a margin increase as “a non-starter” given the increased burden it would impose on consumers amid rising living costs.
Sir Franklyn, though, said dealers should be rewarded for their actions when market conditions and the economy allow. “Policymakers will hopefully acknowledge that the dealers showed restraint at a time when that is appropriate for the country, and it would not be unreasonable when economic circumstances improve somewhat for the policymakers to review that position and do a little something to help give the dealers an opportunity to recover what is lost,” he said.
“You can never do this thing where you say it’s never the right time to give people a bump. As soon as circumstances allow, it’s fair for policymakers to give the dealers a little bump recognising they have to recover from this period of loss.”
Confirming that he was talking about a small margin increase from the present 54 cents per gasoline gallon, Sir Franklyn added of the Government’s stance: “While that is a proper and justifiable position today, the point I’m making is the policymakers have to recognise that when things improve they should revisit the matter as soon as circumstances allow.
“It would be appropriate for them to provide some degree of concession to the dealers. They don’t have to say when that is, but when circumstances allow, take another look.” Asked whether FOCOL and the other distributors, Rubis and Esso (Sol Petroleum), were seeking an increase to their 33 cent per gallon margin, Sir Franklyn replied: “It’s the same issue. When circumstances allow.”
Mr Halkitis on Tuesday said the petroleum industry’s structure, and the fees levied on independent gas station operators by FOCOL, Rubis and Esso, were among the concerns voiced by the Association in its letter to the Government requesting today’s meeting.
“They wrote us a letter requesting a meeting in which they laid-out some of the difficulties that they are facing,” the minister said. “They particularly mentioned increases in bank fees, fees for cash deposits, credit card fees, increased mortgage rates, increased liability and property insurance and some others. They are requesting that we look at the regime that they operate under....
“I know, just from my research in advance of the meeting, that some of the issues that have been plaguing them are the very high cost of renting their premises, the fact that the company that controls the premises also takes off a sum of the convenience sales, the see-saw sales, off the top, and some of them have to pay what is known as franchise fees, so they have a very, very high cost structure.”
It is difficult to see exactly how the Government can assist the gas station operators with these issues as all are governed by contractual relationships, and it would be intervening and interfering with private commerce if it moved as such. The only thing within the Government’s power to change is the industry’s price-controlled, fixed margin structure and the amount of tax it earns on every gallon of gasoline and diesel sold.