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Gas price crisis wiping out retailers’ profits

(stock photo)

(stock photo)

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

Bahamian gas stations say “no business operates” on the unsustainable seven percent gross margins they are enduring amid warnings the sector may have to cut jobs and operating hours to survive.

George Cartwright, owner/operator of the Esso station at the junction of Wulff Road and Montrose Avenue, told Tribune Business: “I think you might have a reduction in employees due to the low turnover we’re having. That could happen. We might end up going to reduced hours, and we might end up going to reduced shop business hours also.

“There is no business that operates on 7 percent gross. There is no way we can survive with that 7 percent gross margin because, out of that, we have to pay taxes and our staff.” Mr Cartwright’s blunt assessment came as petroleum retailers continue to feel the pinch caused by a combination of high fuel prices and the industry’s price controlled, fixed-margin structure.

Raymond Jones, the Bahamas Petroleum Dealers Association’s (BPDA) president, affirmed that jobs are at risk if the Government does not reverse its stance that there be no margin increase in the short to medium-term.

He explained: “When you look at the high cost of doing business and credit card fees, which are running at about 18 cents a gallon, and you’re looking at the cost of a gallon of gas and the 3 percent discount rate that the banks charge.

“You add to that the cost of depositing and the cost of labour, no one is looking to really fire staff, but we could see the point where we get to reducing the hours significantly to try to cut costs at least until we get to the point where the government sits down with us and gives us an opportunity to negotiate a change in the mechanism by which our profit margin is actually calculated.”

Gas station operators have been urging the Government to increase their margins by 50 percent, which would raise them from the present 54 cents per gallon of gasoline to 81 cents, and change the basis upon which they are calculated to a percentage as opposed to a fixed mark-up. As of Friday, fuel prices in Nassau were $6.13 at Rubis, $6.35 at Shell and $7.39 at Esso.

The last time petroleum dealers enjoyed a margin increase was in 2011, when the Hubert Ingraham-led Free National Movement (FNM) government granted a 10 cent increase per gallon of gasoline to take it from 44 cents to 54 cents. A 15 cent increase per gallon of diesel was also allowed.

However, Michael Halkitis, minister of economic affairs, has already ruled out an increase in industry margins on the basis that this will further hurt consumers already struggling with soaring inflation. However, higher oil prices mean that petroleum retailers are increasingly having to use overdraft and credit facilities to pay their suppliers - Rubis, Esso and Shell - for the fuel they sell to consumers. And, as a result, they are incurring increasing fees for using these facilities.

“The retailers are getting to the point where the cost of purchasing fuel and the overdraft fees are to the point where they can’t afford it, and volumes are down,” Mr Jones added, warning that fuel supply shortages may result. “It will be a shortage. There may be less operators in the business because they can’t maintain the power bills and everything else to stay open.

“Every time the price of gas goes up, the Government’s revenues increase and that’s the mechanism. All we want to do is experience the same adjustment based on the cost of doing business as opposed to being stuck with a fixed margin.”

Petroleum retailers in the Family Islands, while feeling the burden of higher prices, are not as anxious to reduce hours or staff to cut costs. Susan Hanna, owner/operator of Griffin’s Service Station in Governor’s Harbour, Eleuthera, said: “We have minimal staff here. So I guess we’re in a different position, because I only have two pump attendants, so I need them.

“We’re also a service station that provides tire repairs and all that stuff. I’m not sure how the service stations operate in Nassau with stuff like that, but we have other areas of our business that we can subsidise with the fuel.”

It is not a “dire situation” for dealers in Eleuthera either, despite operators also wanting to see margins increase. “I’m just hoping prices will soon come back down,” Ms Hanna added.

Jason Russell, owner/operator of Favor’s Service Station, Cat Island, added: “On the island here we don’t complain. If we have to do it then we have to do it. We don’t complain about it like city folks. But so far it’s going good; gasoline is at $8.65 a gallon now.

Despite the high price, Mr Russell is not thinking about cutting staff yet. “I know they are saying that the price of fuel is about to go up again in Nassau, but on the island we have no other way of getting around. We don’t have jitneys and unless people can car pool everybody more or less needs their car,” Mr Russell said.

“If they aren’t going to give us the margin increase, then I wish the Government would do something with the business license because they charge us based on our turnover. I know with the gas stations we have very high turnover, but low profits. And the Government makes more than us. In VAT alone they are getting over 80 cents a gallon, so they need to look into that.”

Comments

Flyingfish 2 months ago

You know I would normally say that this country should move away from gas use to hybrid/EV and implement a working/reliable Public Transport system. Seeing as gas is something we don't produce and spend a lot of money on yet I'm worried that this government is propping its expenditure up on the gas tax. So if we spent less on gas they would have a bigger deficet because of how terribly they balance the budget and their inane ability to not be able to create a profitable government service/company.

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bahamianson 2 months ago

Wiping out everybody's profits except the governments

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