Suppliers blame cost of living for pump prices
(CNS): The irony of claims by the two major wholesalers of fuel in Cayman that the cost of living here was causing high gas prices was not lost on Public Accounts Committee Chair Ezzard Miller on Wednesday. Pierre Magnan, president of the Sol Group, and Nicolas de Breyne, VP of Rubis, both blamed fixed costs for the pump prices, even though, as Miller noted, it is the cost of fuel that has driven up the cost of living.
Magnan also revealed that, because of the low quantities of fuel that Cayman can buy and store, it has pretty much missed the boat on cheap gas resulting from the collapse in the price of oil during the early months of the COVID-19 pandemic.
While Breyne said Rubis had managed to buy one tanker when oil prices plummeted, enabling it to reduce pump prices by up to 80 cents, this is expected to be short lived. He said the next fuel loads coming to Cayman were purchased when oil prices began increasing again.
The two wholesalers were asked to come before the standing parliamentary committee as part of the assessment of the auditor general’s damning report on OfReg, the beleaguered utilities regulator that has failed to meet public expectations in lowering costs and improving service relating to the country’s major utilities.
Despite spending some three hours in two separate sittings before the committee, both of the fuel supply bosses managed to dodge giving a clear answer to the basic question about the margins they make on the fuel sold here and how the pump price is calculated.
Magnan said Sol makes about one fifth of what the government makes on net income of every gallon sold, as he insisted that there were “no inflated margins or profiteering”. But it was not clear what he meant when he spoke about what “government makes”, given that the government collects various fees via different mechanisms on behalf of the public to run the country and public services.
The Sol boss added that the margins were “razor thin” and Cayman was a very competitive market. “This isn’t a high margin business,” Magnan said. “There is no price gauging in the Cayman Islands.”
The men both blamed what the public sees as very high pump prices on the market lag, not enough storage, the size of the market and the fixed costs in Cayman, which Magnum said were “very high”.
Breyne said that Cayman is an expensive country in which to operate and it costs a lot to bring in equipment. The Rubis VP said that inflation ran at more than 4% last year, but in a small market like Cayman these costs cannot be offset through volume, as would be the case in other markets.
He agreed, when questioned by Miller, that the cost of living was driving up fuel prices, which in turn was driving the cost of living and creating a vicious circle.
“We keep hearing that one of the reasons for the cost of fuel is the high cost of living,” said Miller. “But I would argue that the biggest driver of the high cost of living is the cost of fuel. So are you suggesting we are in a vicious cycle, where you drive up the cost of living and justify higher prices because of the cost of living and the cost of doing business?”
Breyne agreed that in some ways it was a vicious cycle, as he pointed to increased land costs, compensation for staff and noted that any service required to deliver their own service is seeing increased costs.
See both fuel bosses before PAC on CIGTV below, Pierre Magnan in the first video (left) and Nicolas de Breyne in the second (right):
- Fascinated
- Happy
- Sad
- Angry
- Bored
- Afraid
This problem is simple to solve. Open up the market to any supplier who meets the government safety and fuel quality requirements. Competition will fix all of this cockroach fight.
It’s true! The cost of living is the reason that everything on Cayman is twice the cost of the States. Food, fuel, material, shipping, Ganja, Alcohol, TP, etc, and the quality is not as good. The cost of a living CIG that must be feed daily.
Simple solution. Pass a law forbidding fuel importers from participating in the retail sale of fuel. Give them one year to divest themselves of any gas stations that they currently own.
Gas stations should be the same as liquor stores where they have to compete on price, and close down if they can’t operate profitably.
OfReg then only has to concentrate on whether or not the two companies are colluding on wholesale prices, and insure that the retail pumps are accurately in the quantities being dispensed.
Anyone should be allowed to own a gas station as long as they are prepared to purchase the pumps and storage tanks, and meet all of the ongoing environmental and safety requirements.
It’s downright ridiculous that a fuel importer can not only demand that a gas station owner must sell a certain amount of fuel each month to meet their quotas, but also give them a percentage on the sale of corned beef sandwiches, cigarettes, and candy sold in the store.
And the importers should be paying the customs fee at the time of import rather than adding it to every gallon sold at the pump. I understand the fee will still be passed to the consumer but how many gallons are imported and unaccounted for between being unloaded from the tanker and reaching the petrol stations which the government in all rights should have taxed.
Authorize the government auditors to obtain and review supporting documentation on fuel purchases. That is the only way to really know what is happening.
My guess is that the AG did that already. She is never backward in coming forward.
Everyone, please wake up that the high fuel costs in Cayman are not a function of the suppliers profits in this matter because every government has been full aware of the costs because all imports including fuel are processed and duty is applied by Customs. Over all these years why is it that no-one in Govt, Offreg or the press wants to expose where the real problem of the high cost of fuel is in Cayman. Investigate and expose the retailers and the massive profits they make which is why everyone wants a gas station. The retail mark up is a massive percentage of the wholesale cost of the fuel and this is never uncovered Why??????
Consumers should be able to transparently inspect the ownership list of all the gas stations, as well as their fuel quality, safety, and equipment inspection reports – all via the OfReg site. We should also be able to inspect all the applications approved to CPA, and never developed, like the across from the Strand.
I think you will find many gas station owners make more moeny from their stores, sales of accessories etc. than from gas.
Yes sol is now Parkland have a look at their team online and yes Cayman look at the local boss and find out who has been made redundant at the company yet they applying for PR I tell you if we don’t get some of these folks out of this place they are going to control every friggin thing here. I will tell what you can’t do it in Canada or anywhere else as a matter of fact yet they have the audacity to come to our island and tell us about our high cost of living Which they are driving up! You people siting on these immigration boards need understand that your actions and decisions have consequences for us all !
Why not ask the question, “What is the average profit for a gas station for each gallon sold?
That would tell us a lot. Currently in the USA, the average profit margin per gallon is between 45 and 50 cents a gallon.
Can anyone tell us what it is here?
Of course they can tell you the profit they make per gallon………. but they won’t!
Knowing the average profit they make per gallon should not be a state secret.
You must not be from here.
In the USA there are not gas stations every few miles and in some cases less than a mile apart. Cayman must have more gas stations per head of population than any where on the planet US gas stations make only cents per gallon mark up however they have greater volumes of sales because Americans on average spend 6-8 weeks a year driving. Cayman gas stations are making massively high percentages of mark up on fuel in Cayman.
We should all be concerned when the PAC and our elected MLAs openly state that the gas stations here form a cartel! Rep. Saunders said exactly this during his rants last week! There is no way Caymanians will see lower prices if this happens, just more profits in the hands of politically connected people.
Remember: many of the MLAs have family or financial interests in gas stations! The goal is not to lower prices, but make themselves richer!
Wonder which gas station has the Government contract. That is a question worth asking.
I recall the guy from Eso in the assembly saying $2 per gallon. Can anyone watch and confirm?
Of course the cost of living increases the cost of fuel.
Both suppliers are not lying. They ARE telling the truth.
But here is the key. The cost of living (keyword) for those benefactors (ie: CEO/INVESTORS) of the local supply companies have to maintain a certain lifestyle. They have lavish and expensive tastes. So of course THEIR costs of living will drive fuel prices.
Just the facts….
All three accounting corruption tests are met in the Cayman Islands (Performance-linked Incentive, Poor Supervision/Redacted Transparency/enabling governance, and ready Rationalization culture that rewards dishonesty). They acquired 75% of SOL for $1Bln because they knew it would continue as a performance ATM for Parkland stock for many years with no CSR or other performance-dragging social/environmental expenses cutting into their ripe bottom line.
We can all work it out if they release their financials for their Cayman Operations-
Why are the Cayman Financials not released to the public?
We want to see their financials for their Cayman Operations
and what profits are being made from their Cayman Operations
Authorize government auditors to take a deep dive into all records related to inventory purchases and sales of fuel on island.
I call bull shit lol
This is what I witnessed watching the PAC hearing:
– Encouraging competition and Caymanian owned businesses by supporting Refuel’s expansion,
**an hour later**
– Telling Mr. Brown that there are “too many gas stations” and the only way to reduce prices is to reduce competition (showing a complete lack of understanding of basic economics!)
Who is the MLA that suggested reducing gas stations would reduce prices…?
We really need to know who is this genius.
Rep. Chris “CPA” Saunders…. https://youtu.be/_w3OnSu-K80?t=245
Saunders again..CPA…?
The same man who wants Caymanians to have more children strikes again with another demonstration of embarrassing stupidity …Unbelieveable.
You people should try to understand it’s not the politicians that’s stupid fools, it’s the people that’s voted for them are the stupid fools again an again and again, idiots
The problem in Cayman is the fact that the choices are so limited for voters.
Why is it stupid to ask Caymanians to have more children? Please explain because I am Caymanian and I am not too smart. Have pity on me and explain so I understand.
Cayman’s own stable genius.
Of course! The members of the PAC have widely known family and financial interests in local gas stations!
If you go to 11:20 into the PAC committee link, you can see Rep Saunders suggest the retail stations collude on pricing as well!!!
I can’t believe what I heard he really was encouraging gas stations to engage in price collusion!
“Magnan said Sol makes about one fifth of what the government makes on net income of every gallon sold,”……so, it seems that government makes more on every gallon of fuel sold than the fuel companies themselves make! No wonder we can’t get any help from OfReg (Government’s appointed regulator of the industry)!!
The undeniable fact is and always has been our prices go up immediately there is an increase in price on the world market, but there has always been an excessive delay in reflecting reduced world prices at our pumps.There is no excuse for this, it is blatant profiteering and fixed costs and our relatively small overall consumption have absolutely nothing to do with this.
Private sector strikes again. I am so proud to be a civil servant.
PAC do the right thing shut down Ofreg and bring them back to the civil service.
Other wise nothing will change.
Everybody blaming somebody else!! WTF!! If anyone will hold regulator to account for their role it is Ezzard and this is his chance! Put fuel suppliers (bulk and retail if the problem starts in both camps) on notice that their gouging must end and hold the regulator to task to ensure fair pricing is passed on to consumers. Clean house at OfReg after this, staring with the “Dr.” and keep Ronnie Dunn and any other Board member who has the will and skill to ensure good accountability from a new, skilled management team, not washouts from other price-gouging entities!
Government needs to always stop raising fuel taxes because it’s the people that bleed and stop blaming CUC for its practices. We have no other competition to CUC but all because of our successive Governments since mid-1960s, so then what? Grow balls and let CUC see their advantages without unfairly passed-down some costs. But generally, CUC is not the biggest in the big picture. Last year my electric bill for a 4 bedroom house (only bedroom areas AC run all the time at recommended temps for efficiency. My bill was in the $850 – 950 range, I changed out my Ivan-replacement system with newer higher SEER one and my bill is now $350 – 450 range, in summer!. So ultimately the people can do many things to cut their CUC costs too, but no say in fuel prices, especially at the pumps!
Ezzard, do it! Make it stop now! Get legislation and the support to get it passed to lick them with sanctions and fines if they don’t comply with mandated goals to ease up the front-line consumer – us!
So if cost of living controls costs, that means it will only go up with inflation. Funny that has never happened anywhere in the world. I would be happy if it only goes 1% per annum.
They obviously think we’re stupid, fuel prices drive cost of living not vice versa
If we cannot trust the fuel companies that should create even more impetus not to deal with them. We should move to solar and natural gas, wherever possible. My next car will be electric. CUC – please transition to renewable sources of energy as soon as possible.
You’ve obviously never installed solar here. Try 3x the US prices for size!
So we should start by reducing or eliminating import duty on battery technology, and incentivize competition and installation.
There is no import duty on solar panels, but the installers will charge you more than enough to make up for that. And probably have them facing the wrong way.
Install them yourself.
If only we had politicians competent enough to ask the right questions then we might get the answers we need without the run around.
I wish someone would have asked why we still cannot buy regular unleaded gas. And its not because its better quality.