CIG one step away from fuel price regulation

| 14/08/2015 | 42 Comments

gas prices(CNS): The minister of planning has warned the local bulk fuel importers that they are one step away from price regulation if they do not start engaging in fair competition on prices and stop holding the economy to ransom. Revealing plans to bring legislation next month to create a transparent competitive environment, Kurt Tibbetts said that if they did not cooperate, government’s next step would be price control.
Pointing to the struggles by successive administrations to come to grips with the pricing structure of the bulk suppliers, he said government was no longer turning a blind eye to what is happening in the local fuel market.

“There is no proper way to explain the unbalanced and arbitrary behaviour of the local prices as they relate to what is taking place in the global market,” Tibbetts said on Thursday, as he told his legislative colleagues of plans to address the age old problem. “The public perception is that local market prices are immediately reflected when prices increase on the world market but very slow to respond when prices have the opposite effect globally.”

He said the fuel importers would soon need to explain their “apparently irrational behaviour” in the face of global fuel prices. “Our first step to regularizing this sector of our economy will be the embedding of a monitoring and oversight mechanism in the new public utilities commission, which is currently being developed,” Tibbetts added, as he pointed to the current lack of oversight which has led to the public outcry of foul play.“There is no clear correlation to the international market or justification for local fuel prices.”

Given the recent reduction of government duty on fuel and low global fuel prices, he said Cayman is still seeing increases and no benefits from global trends and lower prices.

“The government’s firm position is that first of all we must determine if competition truly exists,” the minister said. But if it is determined that the market is not competitive, it will promote effective competition through the planned framework.

“If those measures fail, then the next step will be outright market price regulation,” he warned the two main suppliers of fuel. In order to create a truly competitive environment, Tibbetts added, officials would collect the necessary data and conduct analysis to compare and contrast and evaluate the trends in the local market. “We need to understand the dynamic of fuel prices and parallels of world and local prices and the commercial strategy of local companies. We need transparency,” he said.

Tibbetts explained that because duty is paid on the gallon, customs does not get an invoice regarding the entire bulk fuel arrival. It is based on the local supply from invoices generated here and each gallon sold, so no government officials ever sees the price of a tanker load of oil coming in, just the quantity and the price it sold at locally.

“We have no way of knowing what the purchase price of fuel was,” he said, as he explained why the government would be legislating for that discovery. Without it, he said, CIG could not set a price cap.

He said the law was being drafted in time for the next meeting of the LA, which would allow for the gathering of information and build an adequate institutional framework to create competition. Once ministry officials know what is going on, a regulatory regime will be created to facilitate fair competition.

“The old argument that the market is too small is one that is stale,” Tibbets said, pointing to the significant fuel usage in Cayman in today’s environment and the need for fair prices.

“Fuel suppliers need to be good corporate citizens and work with the government to find a balance and I can tell you … so far they have not shown good faith in that regard,” he said. “We are going to remain vigilant and adapt policies to achieve this end. If this initiative is unsuccessful and bulk suppliers don’t involve themselves in competition, government must pursue other policies for the fuel market.”

Possibilities would be to relaxing barriers to encourage competition or a new storage facility that could hold more fuel. “Let the industry take note, we are going to take all necessary steps to ensure local economy grows and one segment of the economy doesn’t stifle growth for the rest or hold everyone to ransom.”

Tibbetts revealed that a consultant is in Cayman setting the groundwork for the broader public utilities commission but part of his remit would be to help create fair fuel competition as he is an expert in the field. The first aim was to get clear evidence of facts and until the fuel companies revealed what was going on, it would be assumed that they were involved in unfair practices.

See related story on CNS Business: Gas prices on the rise
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Comments (42)

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  1. Anonymous says:

    Yes, Minister Tibbetts, let’s get the ball rolling on some regulation before the Cayman People go broke and BUST.

    Gouging is not legal.

  2. The Country With No Plan... says:

    Caymanians and All, don’t fall for that PR political line that is being sold you – AGAIN! While the price of gas or diesel at the pump is a problem – OUR biggest problem is the Customs/Import Duty OUR Governments have placed on the importation that affects everything we use. EVERYTHING. That’s the problem – fuel affects EVERYTHING you do – food, clothing, housing, commercial rent -EVERYTHING you do.

    The Govt should LEAD by EXAMPLE and REMOVE the Duty on gas/fuel which REDUCES our cost of living and stop this political grandstanding!

    After the Govt reduces their tax on the importation then they can preach to others. Caymanians and Residents, please. We are older. Smarter. And know better. Don’t fall for this “new” trick.

    REMOVE THE CUSTOMS DUTY!!!!

    • Anonymous says:

      Penny-wise and pound-foolish. Duty on fuel is only CI$0.75 per imp gallon of the many margin dollars paid – with no duty existent on the Brac at huge fuel premiums. Additional fuel duty cut of CI$0.25 has already been announced for January 2016 for CUC. It is the pump retailers that calculate and pay the duty – seemingly on some kind of honor system – they are free to cut the fuel with additives without supervision, and take a massive multi-dollar spread on fuel per gallon sold. No routine quality inspections apart from airport (per FAA regs) and main arrival fuel depot.

    • WhaYaSay! says:

      How do you propose gov’t raises funds if the import duty is removed? Payroll tax perhaps?

  3. Anonymous says:

    Mandatory transparency Yes, Direct government regulation hell no.

    Government can barely understand their own financial messes. Now we gonna let them meddle with the private sector and make energy a vote buying initiative which can end up swinging in any direction? no thanks, I’ll stick with the devil I know.

  4. Anonymous says:

    9.22-if you are an example of Cayman education system then damn….it almost like saying that you should drive faster when the gas is low to get to the gas station quicker…

  5. SMB says:

    The problem is mostly due to the mark up at the stations (over a dollar / gallon here in Cayman compared to about 5 cents / gallon in the US). The politicians want to distract us with taking shots at the bulk fuel wholesalers (because that makes them look good with the voters and they are an easy foreign target) but they won’t even whisper any blame at where most of the problem really rests – the gas stations are the real issue. We need politicians to step up and be courageous. Ruffle a couple of feathers for the good of the majority. Show some genuine integrity and leadership and say it how it really is – do the right thing.

  6. Anonymous says:

    As long as people continue to drive Hummers, Mercedes with V-12 engines, the price of gas will never go down. We live on a tiny why are these vehicles necessary or pick up trucks which will never be used to their full potential yet it is probably $125 – $150 to fill up the gas tank ?? and we wonder why the price of gas is so high! ……The petroleum companies know people will pay whatever the price is and they rest of us suffer……….

  7. Anonymous says:

    Get this sorted and protect the people, the supermarkets should be next.

  8. WaYaSay says:

    To: Hon. D. Kurt Tibbetts, OBE, JP, MLA; Minister of Planning, Lands, Agriculture, Housing and Infrastructure: It is heartwarming to see that you are one step away from regulating the cost of gasoline and diesel in the Cayman Islands, but, heartbreaking that you feel compelled to make this giant leap contingent on the actions of the gas and diesel suppliers. Grow a pair……do the job you are paid to do and protect the consumers from the predatory practices of these unconscionable petroleum suppliers with their monopoly.

    As we are speaking in terms of steps, may I suggest that the following steps are considered and implemented at the same time as that “final” step:

    1. Stop charging government tax on fuel by the gallon. Change the import duty law to start charging this tax as an import duty, payable based on cost, insurance and freight, just like we do for a motor car. This solves your problem of the big secret of how much the fuel that is being imported actually cost. If I import a car, it is my responsibility to prove to the customs department, with genuine invoices, what the cost, insurance and freight are and to pay the 30% import duty. No cost to Government……..no new government bureaucracy department needed.

    2. As these two Companies corner the market (monopoly?), fix the profit margin per gallon they are allowed to charge the retailers. There is no need to fix the margin charged by independent retailers as anyone gouging by raising their margin will be exposed by the public quickly enough as word gets around in a hurry on a small Island.
    I appreciate that this will take some negotiation with the wholesale suppliers, but once again, the onus will be on them to justify their expected markup per gallon, based on their actual, provable expenses to store, administer and transport their product, not on Government, who will only have to decide on reasonableness, as they do with CUC (I know…..bad example considering how much profit they make each year)

    3. Do not attempt to dictate the selling price at the pumps as this can result in the companies importing cheap, low performance gas only. The free market is your friend and a wonderful tool. Concentrate only on the percentage of cost charged as import duty and the dollar value of profit per gallon wholesale. Doing it this way will ensure that if they do import cheap gas, the consumer will know immediately as the price at the pump will have to drop to reflect this cheaper cost price.
    This possibly could result in retailers offering cheaper lower octane gas as well as more expensive high test gas, giving customers more discretion on what gas to put into their cars, based on price, similar to what we have now, except we don’t know if the more expensive gas is actually better gas now.

    4. Ease the import restrictions and institute storage guidelines for gasoline, so that if it is cheaper for individuals to import and store their own gas, as it is right now because of the lag behind prices when the price of oil drops, individuals have the right to do so………….just like I now do with my 300 gallon propane tank.

    5. Last but not least, get on with it. Stop waiting for, talking with, and to, the petroleum suppliers, begging them to stop gouging consumers, history shows that all they are prepared to do is BS you and the public. You are the Government, dammit, govern for the good of the people of the Cayman Islands.

    I know that you are really busy and have a lot of things to do, but this one is really important to me…………and just maybe, the rest of Cayman

  9. Anonymous says:

    Why do we care about the price of gas. We and our buddies get it for free! – you government

  10. Anonymous says:

    It may arrive clean to the depot, but retail pump locations are not routinely inspected or required to repair their pre-Ivan subterranean salt-water, rust particulate plagued fuel tanks/pumps, and have free reign on additives and ethanol cut. The fuel inspectorate refuses to identify the offenders for consumers which is fundamentally very offensive. Consequently, some of us are putting junk in our cars, represented as clean gas, and at the massive premiums everyone is focused on. These merchants reaping huge profits for decades need to be made to comply with some minimum USA-derived quality standard at pump in addition to price metrics that conform closer to true market. We need to discuss price and quality.

  11. Anonymous says:

    It looks like a cartel, smells like a cartel and has the costs of a cartel. They had to say something because people are pissed off, but too little too late and too many conflicts of interest. In a normal country these people would be fined substantially and forced to rebate to clients over time.

  12. Anonymous says:

    I hope you regulate all gas prices including your gas station that will be on the new highway to Frank Sound (Kurt Tibbetts), ppm supporter.

  13. Ron says:

    Isn’t will full blindness a crime? Every resident should file suit against the c.i. Government just on the basis of this statement. All these years they having been robbing us the consumers. What else are they turning the blind eye to?

  14. Anonymous says:

    This is so disappointing……they are going to talk about it? If they really want to send shivers down the backs of these oil companies they would turn back the hands of time to 1950. I sit down every day looking for a 75-100 ft barge with the capacity to hold 18,000 gallons of gas. A quick trip to Venezuela or Trinidad I would bring back $3.00 dollar a gallon gas to you folks in one trip delivered straight to you. This island would overrunning in fuels and my pockets would be on fleek.

    But, lets study this for a while ..lol…haha…just start debating the above plan in the LA and watch the prices scream south…if fact, pass the legislation and not enact it and then just got to the gas station and observe….just watch as $2.00 falls of the price…

    Or how about this, CIG actually pass a law that punishes them for price manipulation for the past umm however long they have been here and attaches a huge fine like $100 million and when they don’t pay the fine we seize their assets and sell it to the next oil giant. Works in the USA and UK so I am sure legal precedent exists.. Either one of these plans would help with the fuel situation but I much prefer the trips to Trinidad on a barge so that some of us normal folks can get some of the pie like it use to be in my Grandfathers time and not just the same people over and over again.

  15. Anonymous says:

    Breaking News: For all CIG Gasboy card holders the price of fuel will remain at $0.00 for you and all your friends and family. Your welcome.

  16. Anonymous says:

    The price of oil gas TODAY in Columbia, SC, is $1.99 per gal.
    The price in Honolulu, HI, an island that does not produce gas is $2.91 per gal.
    A US gal at US$ price is directly equivalent to an Imperial gal. (which we use here) at CI$ prices.
    The price in Cayman is CI$4.85 per gal. Say something Alan Newsome, ESSO Country Manager, say something. You’re a Caymanian, say something.

  17. Gas Boy Massive says:

    Why should I care? Gas free!

  18. GasXXX says:

    And just how, pray tell, does an entity (the CI Govt) that cannot even manage itself or produce its own accounts in a coherent form, propose to effectively regulate the purchasing of bulk fuel by the two suppliers.

    Prediction: Post-regulation the consumer will actually experience even more expensive fuel.

  19. Sharkey says:

    Mr Tibbetts, to me this is all soon come talk. I knew about this going on from 1966, and why isn’t something done, and still talking about next steps. This makes me wonder who you represents.

  20. YOU MEAN LIKE DART? says:

    “Let the industry take note, we are going to take all necessary steps to ensure local economy grows and one segment of the economy doesn’t stifle growth for the rest or hold everyone to ransom.”

    I love this if this applies to everyone. Now that the new law says that Status holders can run for office, watch out for Dart if he ever gets the notion to protect his billions in Cayman!

  21. Knot S Smart says:

    Thanks Kurt…
    May I suggest that you involve George Ebanks in monitoring these companies and their price and profit schedules?
    Then the oil and gas Barons will truly know what it feels like to have a burr up their a$$e$…

  22. Anonymous says:

    Could someone explain the purpose of the Petroleum Inspectorate? Isn’t that a post/position that should be eliminated? When a merchant imports goods, invoices have to be produced, in order for Customs to caculate duty payable. So why have the fuel suppliers been allowed to pay on invoices created locally ( what’s sold to the gas stations)? This arrangement is so antiquated and stupid, there is no wonder we the purchasing public are paying such extortionate prices for fuel. It could only happen in Cayman. The lowest prices on petroleum in the world and here the prices are by far the highest at the pumps.

    Wake up and stop dragging your feet, we need a reduction in prices now, not in 2016 or later. The employee at the Government Petroleum Inspectorate was an former manager of an fuel supply company, so he should know the inside workings, what to look for, how to calculate and how all the deviants that are hidden and added on to extort the general public. If he is unable to provide or pass on his knowledge on the matter, it’s time for government to eliminate that post and save some money.

    • Anonymous says:

      They check gas arriving at depot and must certify AV1 gas at airport for FAA compliance. That’s about it. Retailers are free to acquire their fuels from anywhere, cut with additives etc. Some of the fuel tested in 2013 report on Planning website varies in colour from light yellow, to brown to bright red. Common sense would suggest that there shouldn’t be this kind of striking visible variability by merchant when most fuel is arriving on the same tanker! Not their problem they say, and they anonymized the station data to prevent consumer bias! Heaven forbid someone might not want to pump $5/gal sea water into their Mercedes!

  23. Anonymous says:

    Finally some action. Why has it taken so long though when it should have been so obvious that the suppliers were not declaring their import invoices to Customs? This is not rocket science.

  24. No Mas! says:

    Maybe they could send the Leader of the Opposition to talk to Maduro the President of Venezuela. I am sure they could learn a lot from each other………

  25. Anonymous says:

    Mr. You or your cabinet does not have to assume that these local oil suppliers are engaging in ” unfair practices”. Everything thing they are doing defies the laws of microeconomics, and to justify it as confidential proprietary record is absurd. These are the kinds of unfair economic strategies that has place these islands in the international spotlight! When a country’s people suffers to irreparable extends, at the hands of rogue multinationals/businesses, it is the Government’s responsibility to intervene and remediate the existing problem(s). Any contractual agreement intended to covertly harm a nation of people, using predatory practices & strategies should be forced to change its business strategy to institute fair bargaining agreements. The is no transportation/freight costs, no oil commodity shortage, and no (direct) competition this fierce existing in the World today that justifies ~CI$5/gallon (or ~US$6.20/gallon) at local Petrol Stations. It would seem to me that only likely (private) supplier agreement existing is the shifting wealth by defrauding a offshore nation, by keeping their tier 1 business relationships confidential. So, Cayman has a lousy agreement with local petrol suppliers that is based on conditions intended to defraud and entire country- while the rest of world get enjoy low fuel costs.

    This story ordeal isn’t about compitition or conducting business on a “level playing field”; this is about stealing from the cayman people to amass huge profits using questionable partnerships and rogue practices.

    **Unedited. Too pissed off to proof read**

  26. Anonymous says:

    don’t worry ..kurt is looking into this!…..zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

  27. Anonymous says:

    easy equation…. price of fuel+overheads+profit=gas pump prices…
    same as in the states……give me the information and i can solve this ‘riddle’ in 10 mins….

  28. Panda Ring says:

    Wow, if this is anything like ERA’s involvement in regulation of electricity prices then it will be one small step for CIG and one giant leap backward for Caymankind.

  29. Anonymous says:

    Government needs to practice what it preaches! Why is the duty rate fixed ($.50 or $.75 per gallon) so when prices go down as it has done the last 2 years, government gets a higher percentage. If the duty rate was a percentage of the price (like everything else) it would allow government to:
    A. Know the true cost at the time of import
    B. Have a more fair tax system for the general public.

  30. Anonymous says:

    Hot air! Too close to election for Kurt or any of the PPM to ruffle any feathers…

  31. Anonymous says:

    Start investing into moving the country from its dependency on fossil fuel!

    • Anonymous says:

      This will never happen dude. Your pocket-book will forever be under attack as long as you all keep voting these Bobo the Clowns back into office every 4 years.

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