Bahamas Update: Fuel Price Issues

• The Bahamas Petroleum Dealers Association has requested the government to authorize a marginal increase in fuel prices for retailers, who have been advocating for an increase in their profit margins on fuel, but Economy Minister Michael Halkitis rejected those claims.
• Fuel retailers have called on Halkitis to have “a change of heart” and are also threatening to take action to prompt the authorities to react, arguing that the increase in costs has made the current margin regime unsustainable. The Association said that retailers “don’t want to strike,” but the local media reported that last week they discussed possible actions to call the government’s attention.
• Currently, the government collects some $1.70 per gallon of fuel sold in the Bahamas (customs duty plus VAT plus special fuel contribution). Retailers get a $0.54 per gallon margin. That margin was last adjusted in 2011 when it was at $0.44 per gallon. Wholesalers receive $0.34 per gallon.
• Halkitis stated that while the Davis administration is “sympathetic” to the issues raised by the retailers’ association, the government is not willing to endorse any measure that would lead to immediate increases in fuel prices at the pump.
• Last year, Halkitis acknowledged that the government had discussions with retailers about shifting from a fixed contribution regime to an ad-valorem tax based on a percentage of base fuel price. The Association has indicated that it is open to those conversations. If there is no progress in the negotiations, a strike cannot be ruled out.
• The potential of a strike could morph into broader social unrest, due to the effect of it possibly lowering output due to fuel shortages causing a decrease in business deliveries.

(Source: Oppenheimer & Co. Inc.)