Petroleum Dealers' Action Unreasonable and Unwarranted

The Petroleum Dealers Association wrote to Prime Minister Dr Kenny D. Anthony on August 28, 2001 proposing the following:

The Government of St. Lucia is aware that petroleum dealers have been requesting increased margins since 1993. As a consequence, an increase of five cents per gallon was granted in January 1997. Six months later (in July 1997), another five cents per gallon increase was granted. Yet another increase was granted less than one year ago (in October 2000), of three cents per gallon.

On each occasion, these benefits to dealers have been realised through a reduction in consumption tax receipts by Government as it would have been imprudent to pass this additional cost to the consumer.

Since February 1999, world oil prices have sky- rocketed. Notwithstanding, Government has maintained stable pump/retail prices. This has been at a significant loss to the Treasury of over $40 Million.

From April to December, 1999 a total of $8.294 million was foregone. From January to December, 2000 the amount foregone by the Treasury increased to $24.961 million; and for the period January to July, 2001, another $10.985 million was not collected. The grand total over the three years was $44.240 Million.

World Oil prices are yet to stabilize and it appears that this fluctuation will continue in the foreseeable future. Further revenue losses are therefore contemplated, and this will no doubt inhibit Governments capacity for stimulating growth through the Public Sector Investment Programme.

Governments primary objective has been to minimize inflation while simultaneously stimulating economic activity. It would therefore not be prudent at this time to increase dealers margins as this additional cost would increase inflation and further dampen economic activity as St. Lucia braces to face the world-wide recession. Government will not place additional burdens on consumers at this time.

It is also noteworthy that the suppliers of fuel to local dealers have not received a margin increase since 1991. Moreover, efforts to secure compensation for increased transport costs due to increases in time charter hire costs, charter rates, port charges, and pilotage fee of US $1,500 per vessel, have not materialized.

2. Request for Moratorium on Issuing of Licenses

The Petroleum dealers expressed concern in respect of the number of dealers operating in the market. However, since May 1997, petroleum licenses have been issued to four establishments. Of these, two have become operational and one was a transfer of ownership. In effect therefore, the net addition to the industry at this time is just one petroleum dealer. However, there is a broader principle involved. The Government of Saint Lucia believes that competition should be encouraged and market forces allowed to prevail, and unless it is absolutely clear that this is not in the public interest.

The Government of St. Lucia notes that there continues to be significant growth in the demand for petroleum products. For the period January to July 2001, total sales volume amounted to 10,514,789 gallons, some 1,379,688 gallons more than the same period in 2000. It is therefore quite clear that Government has exercised extreme prudence in the issue of petroleum licenses.

3. Request for Universalisation of Rebates to Minibus Operators

With respect to the third request by the Petroleum dealers Association, Government is advised that:

It is therefore the view of the Government that the matter of the petroleum tax rebate should be of no relevance to your request for increased margins.

Government regrets the embarrassment and inconvenience being caused to the motoring public as a result of the "recent cost cutting measures" taken by the Petroleum dealers Association.

September 7, 2001

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