Oil and Prices
Hello St. Lucia,
Here we are once again, with each other.
At a recent Constituency Conference of the St. Lucia Labour Party, I was asked
by the calypsonian, Reality, what was my vision about prices in St. Lucia. You
may remember Reality’s highly unusual calypso, “Eyes in Their Backside”. Reality
was invited to sing his song at the Conference. He wanted to know what the
Government intended to do about “rising prices.” Reality wasn’t the only person
with prices on his mind, because the conference hall went quiet after the
question was posed. People wanted to know.
KEEPING PRICES UNDER CONTROL
I explained to Reality and the conference delegates that the prices of some
basic items had not increased since 1997, when we entered Government. These
include the prices of sugar, flour and rice.
The Minister of Commerce, who was present at the conference, also pointed out
that there are still some basic commodities under price control. Price control
helps to discourage profiteering at the expense of the consumer.
PRICES OUTSIDE OUR CONTROL…
I also pointed out that there are other items – such as cement, plywood and
steel – the prices of which had gone up, but over which government had
absolutely no control. Importers had no control over the prices they paid to
suppliers of these items. I pointed out that the cost of steel had gone up
because China was purchasing all the available steel in the world to finance its
construction boom. I also explained that the cost of cement and plywood had gone
up because manufacturers charged more to produce and transport these items to
Some people are puzzled that prices increase even when some goods are under
price control. Why is that so?
Let me explain. Price Control seeks to prevent “profiteering” by establishing a
percentage mark-up for goods. In other words, Government will say “you can only
charge the customer a mark-up of 10%, 15% or 20%.” However, the price the
importer pays for the goods may actually increase, as is happening now. So,
while the mark-up remains constant, the basic price paid to the suppliers for
the item may actually increase. The result is increased prices at the stores or
supermarkets, as may be the case.
Likewise, the Government does not have to increase duties or taxes for prices to
rise. Taxes on goods may remain the same, but the base price for the goods we
import from overseas may actually increase, as has happened now because of the
increases in the price of fuel.
EXCHANGE OF LETTERS
I recall just the other day, when Minister of Commerce, Philip J. Pierre,
exchanged several letters with the leader of a new political group on this same
issue of prices.
In his series of letters, which were carried in successive issues of the Voice
newspaper, Minister Pierre responded to claims that supermarket prices were
increasing as though they were out of control. The accuser couldn’t exactly
identify what items had gone up and by how much. Even the examples he used –
crackers and apples -- turned out to be flawed. The Minister pointed out that in
the case of crackers, the increase was not as high as the accuser claimed it to
be; and in the case of apples, he was as surprised as I was, that such an item
was being used to make an argument about price increases.
As for supermarket prices… The supermarkets have themselves explained how they
too have to pay for goods at prices that have been increased. Since most of what
they sell is imported, the cost of freight has also increased for them.
KEEPING AN EYE ON OIL PRICES
The price of fuel is the single biggest factor that explains the recent
increases in the price of some commodities. When the price of fuel goes up on
the world market, the result everywhere else is the same: the cost of
fuel-related products, of manufacturing, and the cost of everything else that
depends on energy increases. So too does the cost of transporting the goods,
whether by air freight or by ships.
Any sizeable increase in the world marker price for oil will automatically have
a multiplier effect on every country that does not produce oil – especially
small countries like ours. But it is not only small countries that feel the
effect of increased oil prices. Large countries feel it too. Likewise, it is not
only companies in small islands like St. Lucia that have to face the effects of
the increased costs that result from increases in world oil prices. Huge
Multinational companies also feel the pinch.
Take the US airline industry, for example. Large airlines are either going
belly-up or seriously cutting back on operations. Thousands of workers in the
airline industry have lost their jobs because of these adjustments. Other
airlines have sharply increased the price of airline tickets or cut staff. These
airlines simply cannot keep up with the increases in the cost of their
operations sparked by the increases in the price of oil.
It is precisely because of the effect of these oil price increases that we
continue to worry about the resulting cost of fuel for us in St. Lucia. Indeed,
this matter occupies the mind of every single OECS and CARICOM Government
Leader. We are as concerned now as we were back in June when I made an official
statement in the House of Assembly about the unavoidable increase in the price
of fuel locally.
THE MULTIPLIER EFFECT
The cost of oil on the world market last week was way over the troublesome US
$50 per barrel mark. Those of you who have been watching, listening to or
reading the news would have realized that every time the price of oil hits that
fifty-dollar mark, the markets begin to tremble. That was the case for most of
last week. If it continues to increase – and if it passes the 60-dollar mark and
reaches the 70-dollar mark as analysts predict, then Lord Help Us!
So we have to keep our eyes on the market prices and pray that this is just
another of the fluctuations. But if the price of oil remains where it is or
keeps going up, we can certainly expect collapses worldwide.
But it is good that people like Reality have the will to ask questions about
prices. All citizens must be vigilant about prices. We must not tolerate unfair
practices, whether in respect of prices or in the quality of goods we purchase.
That is why we believe it is vital to empower consumers.
One of the first things we did when establishing the new Ministry of Commerce
was to also ensure that we gave Consumer Affairs more attention. Thus, we
introduced a Consumer Affairs Department that has been able to respond to
complaints by consumers, including unfair practices and “price gouging”.
It is also with concern about the quality of what we buy that we also
strengthened the Standards Bureau, which (incidentally) moved into its own new
headquarters at the Bisee Industrial Site last week.
Another positive thing that has happened for consumer protection was the
establishment of the National Consumers Association (NCA), a non-governmental
body, to promote the rights of consumers. This organization has already done an
excellent job in promoting the rights of consumers.
RESPONDING TO CUSTOMER CONCERNS
The complaints and explanations in the recent public discussion regarding
supermarket prices have also resulted in positive responses from the
supermarkets. The biggest chain, Consolidated Foods, has acknowledged the
existence of discrepancies between the real prices of some items and what
appears on their labels. As a result, the company has announced that it will
voluntarily institute new measures to allow customers who so desire to determine
and ensure what the actual price of each item is before getting to the cashier.
To ensure their profits, businesses have always passed the increased cost of
goods on to the consumer. It has always been that way because that is a basic
law of business. But while it is fair to criticize the businesses when they
engage in unfair and exploitative practices – and some do -- they must also be
praised when they show they are willing to take steps to address the concerns of
their customers. Thus, in the same way that we feel free to express concern
about the monopoly that Consolidated Foods has on the importation, distribution
and sale of basic items, we should also offer a positive note when it displays a
sense of corporate responsibility to its customers.
BACK TO REALITY!
Now, back to Reality – in every sense of the word! Despite recent increases on
some items, St. Lucia remains highly competitive.
As I told Reality: Take a look around. There must be a reason why people from
other islands are coming to St. Lucia to shop – and not only for clothing, but
also for other items. Go to any of the clothing stores such as Hobie and Taxi,
the T-shirt vending outlets in the tourism belt, or even the Sea Island Cotton
Shop and you will find Bajans, Venezuelans and others shopping here. Why? It is
because our prices are better and more attractive than prices for similar items
in the other islands.
And for that, even our critics must credit the policies of this government.
Until next Monday, God willing, keep well. And don’t forget to take part in our
cultural heritage activities throughout what’s left of this month. Vive La