By Bennette Roach
Over the past week Montserrat motorists and other users of petrol and diesel fell even with doubts and some with suspicions over rumours, as like it never fails. We were made aware of Facebook conversations what ZJB radio in an early news report refer to a threat by one of two operators that both owners would stop pumping gas because, “they’ve been suffering continuous losses.”
The rumours were no longer, as ZJBnews continued its report that the Government of Montserrat, seeming obviously to have official knowledge, says they’ll be meeting with the operators of the two gas stations on island, in an effort to iron out some issues that have been raised.
It said further, “the Leader of government business Hon. Premier Donaldson Romeo, when contacted by ZJBNews stated that the situation is being looked at, and that further intense discussions would follow in the coming days.”
The decision taken by the government, as confirmed by the Leader of government business Premier Romeo who when contacted by ZJBNews stated that the situation is being looked at and that further intense discussions would follow in the coming days.
“The matter is being looked at very carefully and in fact new information has come to the table over the past 24 hours that we need to consider and get clarified. We do not want to make any detailed comments at this point,” Romeo concluded.
This matter did come as a surprise, except that it is now just over three years since we were advised of new arrangements and agreed prices.
(see: https://www.themontserratreporter.com/government-sets-new-fuel-margins-for-retailers/).
We here recap for convenience an excerpt from the story of an actual ‘shut down’ back in May 2016.
“The island’s two gas stations took a joint initiative to suspend services on Monday evening in a bid to affect ongoing negotiations between these fuel providers and the government. Motorists could be seen outside the stations on Monday evening—a national holiday—and again on Tuesday morning hoping to fill up at the pumps, but had to turn away since activities were on hold.
“Chief among the grievances of the station owners is that despite adjustments in the fuel prices to reflect changes on the world market, the profit margin to provide the fuel to customers does not reflect any changes. This they argue make the stations unprofitable to operate.
“Both companies have taken this necessary step due to unsuccessful negotiations with the Government of Montserrat to address the cost issues which relate to margins set by the government,” John Osborne owner of Osborne Service Station in St. Peters explained in a statement issued on Monday night.
The situation at the time seemed resolved and a release advised; (adapted for presentation🙂 “The Retailers’ Margin increase was built up from $0.55 to $0.75 as follows:
- Adjustment for Inflation at 20% = $0.11
- Franchise fee erosion = $0.06
- Insurance cover = $0.03
- Total Adjustment = +$0.20
After the deduction of current contracted expenses with Delta Petroleum (Montserrat) Ltd. ($0.06 for pump and ancillary rentals) plus ($0.06 for the Delta Franchise fee), retailers will have a new margin of $0.63 to cover operations expenses, fees, and other unavoidable cost.
This amount also includes the retailers profit or mark-up as recommended by a GoM Consultancy Report, which was discussed with Delta Petroleum (Montserrat) Ltd.
The GoM notes that fuel stations are low profit earners internationally and therefore usually operate alongside another business.”
On Tuesday, July 23, 2019, this week since we printed the first part of this story, the Ministry of Finance and Economic Management (MOFEM) issued a press statement (shown in full) which set out:
“Government of Montserrat (GoM) over the course of several years has been approached by both Fuel Stations and their various owners about their limited profitability on the sale of fuel. In an effort to properly evaluate the situation on the fuel costs and the operation of the stations, two studies were carried out on the profitability of the Stations, and the storage and measurement of their products in 2014 and 2018 respectively.
“…came out in the recommendations of the study…both firms were strongly encouraged to keep proper accounting records and produce yearly audited financial statements.
GoM reminds that in 2016 Government increased the retailers’ margin by 36% to 75 cents per gallon.
Now, more recently GoM received a request from the fuel
retailers requesting:-
An increase to the base cost of fuel calculated by the Ministry of Trade by
twelve cents (12c) to absorb the cost charged by Delta due to GoM increasing
its lease fees by fifty percent. GoM now says, “This is an erroneous assumption
by the Retailers as Government has not increased Delta’s lease fees.”
An eight (8%) profit margin for retailers, as opposed to a fixed margin; and A tax exemption on profits for a period of eight years.
This year, the retailers were again unable to provide any proper accounting records or audited financial statements to substantiate their claim surrounding any losses being made. Government however, in consideration of their request, supported by Delta’s 2018 report and giving due consideration to the impact increased fuel prices will have on its citizens and on the economy, approved a further 39.6% increase in the retailers’ margin. This has now shifted the retailers’ margin from 63 cents per gallon to 88 cents per gallon. Between 2016 and 2019 the retailers’ margin has increased by 60% moving from 55cents to 88 cents.
In the past month, Government of Montserrat, further approved a reduction in the rate of company taxes to 5% for the retailers for a five-year period, and has committed to a review of the calculator for determining fuel prices.
That response suggested that the government was not willing to consider although Premier Romeo said they would look further into the matter.
By Friday with news earlier that Delta Petroleum Ltd. had intervened with information that by contract the fuel retailers could not shut down, there was already reaction to what appeared to be a Facebook post which said, ”Last month I thought we had finally come to an agreement on a margin that meant I could generate a profit for the business and even finally get a pay check from something that takes up at least 15 hours of my day 7 days a week….I then heard that the FS on his return made some changes to the agreed proposal perhaps causing the reason why I am disgruntled today.
“Therefore I am sorry to inform the public that if this is not rectified by Friday the 26th of July that both Osborne Service Centre and A&F will cease their fuel operations.”
“This new threat of closure reminds as above in 2016, which were followed upon, when the Government eventually met some demand, which as was shown in the 2016 report.
By late Friday, listeners to the ZJBRadio breakfast show would have heard an explanation from Osborne in which he said at the end in contradiction to the earlier threat calls reactions a misconception: “But the one misconception I want to clear up, is that the gas stations weren’t holding the country at ransom; we weren’t saying if the government doesn’t give this we’re going to shut down what we’re saying is we cannot continue like this period…”
He explained: “we have a contract with Delta that makes Delta our sole supplier, so basically we cannot go to any other supplier of petroleum to buy product for the gas stations. Delta now has a contract with government that binds them to supply fuel to the public. the issue here is a little bit different to… “
He then suggests that the suggestion that he cannot ‘shut down’ (as they did back in 2016); “Am not going to say that the Premier is wrong that there can’t be legal ramifications, but what I was told by the regional manager, Delta can be sued by the government if the gas stations don’t supply. But what happens with the gas stations is that we purchase fuel from Delta and then sell to the public.”
Osborne then sought to point out their financial hardship. “So, I find it very hard that you would now say to me that if the gas stations can’t buy fuel, that there could be legal ramifications for the gas stations going forward. If they can’t buy fuel, they just can’t buy fuel…Delta could probably credit fuel but if you’re already making a loss on a fuel, if you crediting, it means that you push yourself more into debt.
“So, what the manager did say to me is that, yes closing you have to consider Delta’s position.” That Osborne says, “…is fair enough because I mean we do have to protect our supplier.”
At the end of that long ‘explanation’ Osborne said he is making a promise to the public, as he declared: “I’m a man of my word. I made a promise that I would stay open, and as I said, Delta made a commitment to us that they would help us in whatever way possible going forward. So I can’t go and retract my word now, because I already made that promise,… the public doesn’t have anything to worry about going forward because I said, the government is willing to negotiate with Delta going forward and Delta is willing to do whatever they could on our behalf, so let’s hope that we get this issue resolved anyway; we just will probably find other means and ways around the issue.”
To close the week of the back and forth with no sounds of the petrol retailers getting more money to alleviate or satisfy their complaint, Delta regional office issued a statement which was read to ZJBRadio by local manager Roselyn Cassell-Sealy where she said: “regional general manager for Delta Caribbean Bevis Sylvester has issued the following statement to comfort the Montserrat public. Further to a press statement presented on behalf of the regional general manager of Delta Caribbean on Wednesday, he has asked that a further statement be made to set the general public at ease.”
“This is the statement. Delta Petroleum has an obligation to the people of Montserrat an exclusive contract with the government for the supply of petroleum products there’ll no closing of service station whereby the public would not be able to receive petroleum products. Delta petroleum stands by its exclusive contract to supply the public.”
(see: http://www.themontserratreporter.com/gas-stations-threaten-shut-down-to-influence-price-markup/)
https://soundcloud.com/user-987002611/john-osborne-sheds-light-on-the-fuel-supply-controversy
