Gas prices unrealistic and unjustified

| 17/12/2014

The prices at the retail pumps across Grand Cayman are unrealistic, unjustified and cannot be allowed to continue without intervention from our government. Although I write for myself, I am sure that I echo the sentiments of many who call these Islands home, that I am completely mystified as to how across the United States you can drive up to a gas station and purchase gas at US$2.00 a gallon and we here in Grand Cayman continue to pay CI$5.65 or US$7.06.

We purchase the majority of our fuel from the Gulf States, Texas in particular. In Texas today (December 10th); the average price of gasoline was US$ 2.16 per gallon.

Global oil prices are at levels last seen before the global economic meltdown. However, recent events are placing even more downward pricing pressures on oil prices generally: US domestic increased production; additional capacity coming on stream such as Africa (due to less internal political turmoil and more oil reserve findings) and so far, the oil production from Iraq has not been threatened by the ISIS threat. To further drive prices down, Asia and Europe demand is assessed to be weakening, creating what will likely be another “oil glut” in the New Year.

Some retailers of gasoline have said to me that we have to be mindful when comparing US prices to those in Cayman because of the US government subsidy given for Ethanol production. Well, my research shows that the US government did in fact have such a subsidy but it ended in 2011. Also, the subsidy was to US refineries only.

Our local gasoline suppliers should not be allowed to continually play games with the Caymanian consumers by always throwing up clichéd excuses like “economies of scale”; “global events”; “lagging effect”; “fuel duties” and “irrelevant US retail prices” because the true fact is that 90% of our gasoline that is imported in the Cayman Islands comes from the US Gulf States, predominantly Texas, and today you can buy a gallon of gas in Texas for US$2.16 per gallon. Indeed, since 2012, the price of regular gas (US$/G) has fallen some 40% to some US$2.60 currently.

We in the Cayman Islands have not seen a reduction of that magnitude ever!

The recent reduction of cents per gallon equates only to 0.07%. We can surely demand and expect a better treatment by our local gasoline suppliers than that.

One should also bear in mind that when these large oil companies are entering the marketplace to purchase their allotment of oil supplies, they utilize their profit centers to place their bulk orders. These profit centers are wholly owned subsidiaries of their parent companies and as such they utilize their tremendous purchasing power to ensure that they can secure their individual fuel allocation (based on forecasted demand from their regional counties/ islands that they supply) at discounted prices. This is so because in the real marketplace the more you purchase (in monetary terms) the greater is your leverage to secure lower or most favored prices.

To conclude my letter and hopefully drive my main argument home let me say this:

Once these profit centers (wholly owned subsidiaries of the large oil companies) purchase their fuel allotment, they then in-turn “on-sell” their fuel to their clients. These can be other smaller subsidiaries that are scattered around the world but certainly they will include those in the Cayman Islands.

These larger oil companies have the capacity to even bulk store their fuel and then to “sell/ deliver” to their smaller regional subsidiaries or affiliated companies as and when they demand more supplies. But what is vitally important to always bear in mind is that these regular and random oil deliveries that one sees arriving at our South Sound Terminal are not (I repeat!) not, being purchased at high prices on a spot basis. These are inventory fuel deliveries, made in advance, at the best possible market prices, by these individual “profit centers” or wholly owned subsidiaries of the large oil companies.

In essence, due to their ability to bulk store their own oil inventory, these “profit centers” are actually “selling” to Cayman their own fuel product.

I support the ongoing discussions with south Texas based Navasota Energy, which I firmly believe would result in our own ability to experience long term lower fuel prices by the development of a new bulk fuel storage facility which could be ideally situated in the deep waters in our Eastern district. Failing that, it is my position that government should consider the implementation of price control legislation, which could be invoked as the situation demands, to address what we are currently experiencing.

What I am saying is that we, the general public, in these beloved Cayman Islands are being subjected to modern day “high way robbery” by our local gasoline oil distributors’ and also that based on what has been happening in the global oil and petroleum market, since 2012, the retail prices that we are being subjected to in regards to our local gas prices are “unrealistic” and “unjustified”.

Category: Viewpoint

Comments (72)

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  1. Anonymous says:

    Gas prices are similar to the pricing of other goods and services in Cayman, it is just how much consumers are being ripped off by business owners is far more transparent.  The real problem is that limitations on external capital investment and ownership of businesses leads to duopolies or oligopolies in virtually all areas and this allow the owners to reap oligopolistic profits at the expense of the consumers.  Wholsalers do the same to retailers, unless the same person/family controls wholesale and retail in which case super-profiteering is possible.  If people are worried about the cost of living in the Cayman Islands then the best thing to do to dramatically reduce the cost of living would be to abolish the 60% local ownership restriction on local businesses.

  2. Anonymous says:

    Its not just the quality of the gas but the quantity that needs to be checked. How is it possible for me to fill my Mini gas tank with more gas than it's maximum capacity in imperial gallons?.

  3. Anonymous says:

    I just filled up in here in Texas for US$1.84 gallon.

  4. Anonymous says:

    Ask the question: $5/gallon for what exactly?  Download and read the inspectorate report from 2013 and visually compare the colours of what should be identical fuel samples served from around our islands in that report's appendix.  The variance in some cases is alarming.  Various contaminants were listed.  The inspectorate checks fuel at main depos, and airport.  However, there are no inspection schedules for retail pump facilities, no restrictions on where dealers source their "fuel", and no formalized regulation to ensure fair trade on quality.  They can legally sell you $5/gallon of fuel cut with just enough sea or rain water, contaminants, or proprietary additives that combustion is achieved and fingers-crossed most will never notice.  Until the car has to go to the garage for thousand dollar repairs, then it's just tough luck for the unfortunate consumer.  In the year since this report was created with public funds and published, everyone (media included) seems to be okay with continued coddling of petrol barons at the expense of consumers and their property.  Status quo doesn't sit well with me on this.  Definitely not against the backdrop of current sky-high margins.

  5. The REAL Truth says:

    Stop allowing voted in politicians to run "other" businesses (like gas stations) and they might just help you fight the high prices.  Otherwise the persons in charge of the prices are the ones getting the profit.  Most developed countries have figured this out already.

  6. Anonymous says:

    Broward county florida. today gas is $2.25 us per gallon

    • Anonymous says:

      But you would then be spending New Year in one of tackiest lower middle class areas of America.

    • Anonymous says:

      The best thing about filling up with gas in Broward County is that you know you can get away from Broward County.

    • Knot S Smart says:

      Yes but Broward County has the highest number of 'Pretentious People' per square mile than anywhere else in the world…

  7. Anonymous says:

    Of course we simply do not know who is making the money (if anyone is) because we don't have the breakdown.

    What we do know is that most of the gas stations on  GC at least are on prime or near prime real estate. That means more capital nvested so the owners will ned to make more money or they are better advised to tear the station down.

    Also that the people working at Gas stations in the Staesdo not make as much money per gallon they sell as our people get paid (need to ge paid because of the cost of living).

    Yes les find out the real breakdown and i it is te distrbutors ripping us off then lets hit them with price regulation.

  8. Anonymous says:

    The difference in price is even worse than anyone realizes. The US prices quoted includes US taxes. Fuel exported to Cayman is not subject to the US taxes. Therefore our amount of ripoff is even worse.

  9. Anonymous says:

    The price of gasoline is not that high.  I don;t understand why people moan about it so much.

    • Dred says:

      You are clueless aren't you? Gas affects every single thing we do, the food, the clothing, the preschool, utilities like light is 60% fuel. It is included in each and everything. I would not hesitate to say that fuel cost monthly runs about CID 500 to CID 1,000 or more of our monthly bills if you take into account that: CUC if your bill is CID 500 your fuel is about CID 300 plus you spend CID 150 to CID 200 on fueling your car plus you are paying fuel cost on everything you eat plus water and other things we don't even think about.

  10. Anonymous says:

    There is plenty of room for more tax on gas prices.  It would be a sensible and environmentally responsible target for increased revenue.

    • Anonymous says:

      Do the distributors still get to keep their windfall profits if wepay more tax?

  11. Anonymous says:

    I never really notice how much I pay when I fill up.

  12. Anonymous says:

    You would need to factor in the impact of income tax, property taxes etc when comparing the true cost of gas in the US in terms of effort needed by an American taxpayer to purchase one gallon of gas.  Or you could just start payng some income tax I suppose.  Would you like that?

    • Anonymous says:



       How would paying income tax make Cayman gasoline prices less ridiculous?

      • Anonymous says:

        The point was the American price analogy is a misleading one, because you need to factor in income tax to reflect increased opportunity cost of  the US purchase.  But that is clearly beyond you.

        • Anonymous says:

          Income tax rates have no significant effect on commodity prices. Moreover the poor man pays the same as the rich. You are just trying to change the subject.

        • Anonymous says:

          Since the Cayman distributor pays no income taxes, would that not favor a more competitive price? Obviously, the Cayman market is inelastic due to oligopoly.

        • Anonymous says:

          It is a comparison, not an analogy. Would you care to comment on the effect of a supply duopoly on the price of an indispensable commodity in a land without antimonopoly legislatiion 

           

          • Anonymous says:

            Of course the anti-competitive company ownership laws generate oligopolistic profits increasing costs for consumers – that is true for almost all goods and services in the economy.  But there is no political will to deal with that as it would affect the capital rich influential business owningfamilies.   If you really want change abolish the 60% ownership rule.

        • Diogenes says:

          No, they have a perfectly valid point and your sarcasm is misplaced.  There is tax on gas here, but its a fraction of the price differential between here and the US retail market.  Allowing for the old arguments about the Cayman market taking time to adjust to price moves on the US market because of pre bought supply, the simple fact remains that the profit margin per gallon here is enormous, and it has jack to do with tax.  Perhaps that's beyond YOU however.  Engage brain before throwing rocks at others.  

           

  13. Anonymous says:

    Stop moaning.  If you can't afford it get the bus.

    • Anonymous says:

      No one is moaning here. Just the real hard facts are for once being aired. Good going George!

    • Anonymous says:

      One has to “complain” as the public is being royally ripped off with our artificially high prices. You go George…speak for us the ordinary man on the street. No one else is!

  14. Anonymous says:

    As a commitment to environmental policies, a further $1 a gallon should be imposed on all gas to contribute towards a fund for environmental programmes.  The price is quite cheap as it is.

    • Knot S Smart says:

      If you feel like contributing $1 to the environment for every gallon of gas that you use – you can still do that by depositing your contribution into my account at Scotiabank…

      I will use it to improve the environment – no doubt…

      • Anonymous says:

        It is only by such taxes than neanderthals like you can be nudged towards making enviromentally sound choices.  It is the interalising of the external costs you see.

      • Anonymous1 says:

        What – to be spent on more dump consultants? Or more oversesas trips for Juliana and her entourage? Do you really think it would help the environment if we all give the CIG more money? If you want to donate to an environmental charity by all means go ahead but leave the rest of us out of it.

    • Anonymous says:

      Unfortunately you fell for the BS line that Governments use by linking taxation to environmentalism, it's quite clever, as to object to the increased tax you are seen as objecting to saving the environment, and therefore deflecting any anger at the increased tax as being needed to save the environment.   More tax doesn't equate to environmentalism, one can be had without the other.

       

      • Anonymous says:

        Are you saying raising the cost of gas would be environmentally helpful because people would turn to more "environmentally friendly" methods of transportation? Even electric cars use fuel as that is what powers CUC to give your electric car electricity. Plus until we have a more organized and effective public transportation sytem in place, we will need to continue to drive our own personal vehicles. So please explain how rasing gas prices helps the environment becasue I am apparently lost on this one… 

  15. Anonymous says:

    Many of the big familys bring in their own fuel

    We the little man cannot do this

    The  cost to the big familys is about $1.45  per gallon in miami + .20 cents for shipping it in per gallon  they bring it in in 5000 gallon tanks. you do the math 

    that said 20lbs of propane costs just under $10 US in Mami and the propane gas people charge you almost $50US

    shipping cost is about $3 US per 20lbs

    • Anonymous says:

      BTW the average gasoline tax in the US is about US$0.68 per gallon (about $0.185 federal tax and an average of $0.50 state tax.) On an Imperial gallon, that is equivalent to about CI$0.68. Aside from the minimal extra shipping cost the rest of the price difference you see goes into the dealers pocket.

  16. Anonymous says:

    Is it really a surprise that we are being ripped off for fuel?

    It is true that the shipping costs are higher, we buy in smaller quantities and there is a fuel duty.

    It is also true that we use the Imperial Gallon rather than the US Gallon, so we get 20% more for our money.

    But none of these is enough to merit the price differences.

  17. Anonymous says:

    gas prices unreasonable.  No need to bring in other investor's simply limit the amount the distributer/supplier can charge like any other monopoly or duoploy would be subject to. 

    The maximum mark up cost should be say costs plus 10% return.  Fuel stations should then be allowed to set whatever price unless 1 or 2 or 3 persons own all stations

     

    competition competition

     

  18. Anonymous1 says:

    We operate in imperial gallons.  1 imperial gallon – 1.2 US gallons.  So we're actually paying US$5.88 per US gallon. Fuel duty is, I think US$0.91 per gallon so that leaves US$4.97 that we're paying to the fuel companies.  Assuming it costs $1 per gallon to ship it here and distribute it (and that seems like a lot) we are still paying about $4 per US gallon, or nearly double what they are paying at the pump in Texas for the same petrol. So yes, we are being ripped off.

    And don't forget that over 50% of your CUC bill is for fuel. With oil prices plummeting worldwide when are we going to see our CUC bills coming down?

    • Dred says:

      Good points but let's be real. Gas cost for shipping is pennies on the dollar and nowhere near $1. It works out to somewhere in the neighbourhood of about CID 0.15 to CID 0.20 per imperial gallon. The next thing to point out is RETAIL prices Vs WHOLESALE prices. While retail prices are sitting today around USD 1.669 wholesale prices would be USD 1.30 or less.

  19. Anonymous says:

    US does not use Imperial Gallons

    So Cayman gets more fuel to he dollar

    • Anonymous says:

      The US/CI exchange rate is almost exactly the same as the difference between US and Imperial gallons. If gas in the US is $2.19, which is the in New Orleans tonight, that is about the same as CI$2.19 for an Imperial gallon. The rest of the Cayman price is a little shipping and a lot of BS.

      • Anonymous says:

        There is duty of 90 cents and shipping of around 20 cents so up to $3.19. Price at pump for regular unleaded is around $5.19 today in GCM so the "BS' is valued at CI$2.00.

  20. JTB says:

    It's the tax, George

     

    If you want to know where the money you pay at the pump goes, ask Alden to explain it.

     

    This is the price you pay for not having income tax, and for any Caymanian who wants one to get a job with the civil service.

    • job says:

      You totally miss the point of the isue.  Taxes are substantial.  Regardless, world oil prioces are still the issue and a much greater percentage of the consumer cost.  Cayman fuel distributor are takin advanta of teir cative audience and proffiting incredibly while we suffer and  contribute to their unjustified profits.

    • Anonymous says:

      The tax is only 75 cents, so still a couple of dollars difference.

  21. Anonymous says:

    Thought the great PPM would reduce cost of living! they are quiet, dormant and docile! Just like the typical caymanian today!

    you should go independent, legalize gambling and marijuana tourism and be oneof the most profitable and affluent contries on the planet – we already make 700 million in revenue, that would quadruple! Then get some young, vibrant Caymanians (like myself 🙂 ) in office to ensure it stays that way!

    LB

  22. UHUHUH says:

    Thanks George! 

    • Anonymous says:

      How in the hell can you seriously compare gas prices in the US with our islands????  We consume a very minor portion in comparison to the US and hence we have very little buying leverage with the major oil companies. Goverment can do their part by 1. Lowering Duty and 2. Come to terms with gas/oil providers to lower their guaranteed profit margin.

      Years ago I came across a document from the Texaco (Rubis) Office on Cayman Brac – which clearly stated a 55 cent per gallon margin for the then 3 gas stations on the island (the one in Stake Bay has since closed). 

      Mr. Ebanks I have been all thru the U.S. and can tell you that gas prices vary a lot from state to state and city to city – so your comment about $2.00 per gallon is misleading. 

      Why don't you compare our prices to the Motherland or other parts of Europe?

       
       
       
      • job says:

        Anonymous grow some hair and identify yourself.

        Average gas price anounced today in the Wall Stree Journal is $2.46 US. That price is about a 40% reduction over the past 6 months. Over the same time, the price of gas on The Brac has incrreased y $0.10.   Can you imagine what that transltes into as profits for the fuel distributors!!!  Wh don' t you and the lgislative members get that ?  We are being raped!!

      • Anonymous says:

        What you miss out is it's not Texaco anymore, the mark-up has changed and presumably that's how much they were allocating to the gas station as profit, not how much is taken out, or added on by everyone in the loop, plenty of hands in the cookie jar.  I remember one of the stations saying they 'only' made $1.40 per gallon back when oil was $110 a barrel, now the base cost has fallen to $56 I wouldn't be surprised if the mark-up was nearer $2.25 a gallon.  Or $22.50 for every 10 gallon fill up being skimmed off as profit (before gas station costs).

        I don't begrudge anyone making a fair profit from enterprise but my reckoning of what's fair is obviously different to the gas companies.

      • Knot S Smart says:

        I tried to reply to your post – but I used so many cuss words that CNS thought it was Ozzie – so they deleted it…

      • Anonymous says:

        10 years ago it was a fact that Esso gas stations were making a retail profit of CI$1.00 per gallon. I don’t think they are making any less today. Most likely though, they are making more than $1.00 per gallon.

  23. Anonymous says:

    CI$5.65 is quite reasonable for petrol, especially given the short distances needed to be driven in Cayman.  Europeans pay far more than that.

    • Anonymous says:

      Context is everything. We are not in Europe.

    • Anonymous says:

      Right on the spot!  Last time I was in Germany seems like petrol was sold by litres and it was the equivalent of over $8 US!!!

      • Anonymous says:

        This includes you road tax.

        And in most EUropean countries, your travel costs are deductable.

      • Anonymous says:

        That would be last time you were in Germany and oil was still $115 a barrel, not $56. EU governments apply a LOT of tax to fuel in order to a) increase tax revenue and b) curtail demand so they can meet their environmental commitments to reduce greenhouse gas, neither applicable here.  The high cost is pure profit by the oil suppliers/gas stations because they know they can gouge the customer anget away with it.

    • Anonymous says:

      In the UK they are still waiting for gas to drop below US$1.60 a litre!

       

    • Anonymouss says:

      (Translation to this comment 18/12/2014 – 08:02)

      Because the EU and UK are taxed into oblivion, artificially keeping fuel prices high, it is thefore OK for us to be ripped off in Cayman, and therefore should be thankful to ONLY pay 7.00 USD a gallon. 

      Is that the point this comment?

      So if a ham sanwitch costs $45.00 in Tokyo, we should'nt complain about our $25.00 sanwitch here….

       

      By the way, there has been a 40% reduction (probably more now)  and percentages (%) affect overall prices of fuel.  low fuel, also means lower taxes.  there is absolutely no good reason that virtually none of the 40% reduction has affected fuel costs here.  NONE.  Who gives a sh@t what the cost of fuel is in London??  We don't buy it there! 

       

       

    • Anonymous says:

      The price in Europe is due to punitive gasoline taxes. The price in Cayman is due to an incredible mark-up by the distributors. Which one of them do you work for?