Gas station owners deny high margins
(CNS): Two of Cayman’s 21 gas station owners have written to the press denying being the source of problem when it comes to the high cost of fuel at the local pumps. Johnny Brown of Brown’s Esso in George Town’s industrial area and Osbourne Bodden, the owner of Lorna’s Texaco in Bodden Town, said it is not true that station owners are making profits as high as $1.78 per gallon, as reported by a local newspaper. The owners said that there has never been a good margin for dealers on petrol in Cayman and it is the convenience stores at the stations that have subsidised fuel sales. Bodden and Brown say their margins are between 15-20%, from which they must pay all their overheads.
“With the rising cost of doing business in the Cayman Islands, one does not have to be an accountant or an economist to figure out that a 15-20% margin, the accurate figure, is not something to boast about,” the two station owners stated in their letter to the editor of the Caymanian Compass. They said the margins cannot sustain a business which must pay staff costs, licences and utilities.
Bodden and Brown said it was their convenience stores that sustained their businesses and the high cost of doing business with the low margins on fuel is what makes the goods in these convenience stores more expensive. The premium people pay on items in the small stores is down to the twenty-four hour, seven day per week access. “This added mark up in c-stores is what subsidises the fuel sales and allows gas stations to survive,” the men wrote.
The two owners said that at present most stations are struggling to keep going, having to make cut backs in staff and expenses and looking towards self-serve only pumps. With local fuel prices consistently high even when the world prices appear to be coming down, the question regarding the real source of the problem continues.
The price of fuel in Cayman is impacted by a number of issues, which includes the size of a gallon. Cayman stations dispense fuel in imperial gallons, which is twenty percent more than a US gallon. Regular grade gas is not available here, which means the lowest grade is premium, adding more money to the cost of fuel. Government duty now accounts for 85 cents of every gallon sold and in most stations the cost of full service also pushes up the pump price.
The owners also noted that from their 15-20% margin they must also cover Port Authority fees and the bulk fuel distributer annual license fee, as well as the usual utilities and personnel costs.
With the rising cost of fuel, consumers are reducing consumption but the station owners said they continue to do their “best to absorb rising cost and only pass on what is absolutely necessary” in order to survive, they said. Denying that the petrol stations were the “big bad wolf”, they said they were paying their way but struggling like many others.
They said the price of fuel was down to the supply chain and government policies, which significantly adversely affected the price, which Bodden and Brown said was where the public and the media needed to direct its attention.
See full letter below.
Category: Local News
PLEASE READ AND CONSIDER
A gas station makes its profit per gallon so say gas is $5 per gallon And the gas station makes $1 out of every gallon they sell so you buy 1 gallon of gas ($5) the gas station makes $1… simple enough now let say gas prices go up to $6 per gallon the gas station still makes the same $1 per gallon now if the gas goes up are you going to say well $5 isn’t a gallon any more ill by $6… probably not… so you go and buy the same $5 gas which is now less then a gallon because a gallon cost $6 and the gas station is no longer making $1 profit because its no longer selling a gallon of gas when u purchase the regular $5… My point is the higher the gas price is the lower most gas stations profits are so why raise the price?
I have nothing to do with any gas station on the island this is just my personal understanding hope it is helpful (also the prices and profits are just for examples not true figures)
Just tell us the profit per gallon and let us decide. We are smart enough. You are in business and need to make money. We understand. Tell us the truth…
Next up, supermarkets….
In the US 5% max – I think Cayman is close, but come on out Woody and Kirks and let us know…
O
To the bloggers. Does anyone understand the difference between US gallon and IMPERIAL gallon? One is 5 bottles, while the other is 6 bottles. Ask what is purchased by the twosuppliers and what is being sold to the 21 gas stations? Then, and only then we will have a better understanding price-wise.
so its collusion……
Ozzie may not be making a profit on gas; but he sure as hell is making a killing on the outrageous prices on the goods in the store. You cant buy bread or milk from this man.
While the gas station owners are whining about their profit margin and blaming the government, they need to be reminded that in the US, for example, most gas station owners pay income tax, property tax, state sales tax, and federal excise tax, plus whatever local license fee and franchise tax there may be. Cayman's problem seems to be that there is no real competition in this business, otherwise the margins could not be maintained. Don't know why that is but someone could ask the owners whether they negotiate their prices and market share among themselves. As I understand it that is not illegal in Cayman and could easily explain some of the problem.
Can you say price fixing? Unusually high profit margins can only be maintained by discussion among the market players.
The profit made by gas stations is in the region of 80 cents per gallon. All the owners agreed that this was the profit margin. XXXX
if it is that is extortionate.
They are all to blame. Greed on all fronts.
I really don’t want this to look like an attack on Mr. Brown and his On The Run stations but I believe this needs to be said.
On The Run stations prior to the sign postings and the FORCED margins was ridiculous in price. The FORCED margins has brought them closer to other stations but I believe you will find them in the upper tier of the pricing when compared against other stations.
What I really would like to bring up though is the item prices inside the store because they are literally OFF THE DEEP END.
Half Gallon of Milk:
On the Run: $6.50 approx. Fosters: $3.25 or thereabouts: Mark-up: 100% or thereabouts
2 Litre of Soda:
On the Run: $4.00 Fosters: $2.49 or thereabouts: Mark-up: 60.6% or thereabouts
On the Run was also I believed the first to introduce the $1.99 patty. A Patty at the time could be found at other stations for CI$1.35. I know that it was that price at Eastern Avenue Texaco at that time.
Let’s keep in mind I am comparing two retail prices. Saying that EVEN if he bought it at RETAIL PRICE (andhe does not) he would achieve these Mark-ups to get to his price. I suspect he is paying possibly as much as $0.50 less when he buys it which would make his mark-up that much higher.
I really only shop at On The Run when I am in an emergency situation and stations with theirEXAGERATED prices would go if our Government allowed stores to open on Sunday.
The matter on Sunday store openings needs to be brought back to the table. I am curious what PPM stance will be on this because of Mr. Bodden and his store whether he would support this.
oh my heat bleeds for the poor station owners…
hey! Nice big boat Ozzie!
Envey is s bad thing, work hard, gain a lot. Never look at what the other person has and expect to get the same. Bad streak.
Yeah Johnny Brown, you are really struggling to make ends meet I am sure, now I believe that all the stations that did not write a letter are probably the best places to get gas
Who gives a crap – we will never know the true story anyway. If it isn't the store owners ripping people off, it is Government.
I went and bought vacuum cleaner bags in a local store the other day – 2 for CI$20!
I went to Walmart in Florida, and got three for USD 9.99.
The store owner blames the high overhead and import duty – Government blames the greedy store owners, and round and round and round we go………….
The government should get on the gasoline providers to get gas prices down to sane levels. It is shameful what thesegas stations charge. Of course they defend their prices and blame others.
To have prices in Cayman over double what gas prices are in the US is crazy. Nationalize the whole fuel industry and set prices if these people cannot be responsible.
The truth is all we ask.
Ask yourself why the gas stations will not disclose their buying and selling price and the reason is that they do not want the public to know that they are making enormous mark up percentages of around CI$1.00 per gallon in Cayman when gas stations in the USA make just cents per gallon. The gas station cartel is aniother secret society. The public should know the truth and the real figures in this secretive business. Tell us the truth and ye shall be set free.
I don't blame the gas stations, the gov are greedy on taxes, big mac put the tax up 25 cent on the gallon over night plus the tax that was already on it. greed..
These guys are making over a $1 per litre … shameful
THis is why there are so many gas stations for such few people.. It's a gravy train for the owners..
Government should control pump prices as high pump prices are hampering the recovery
Are you an astute businessman or another grasshopper? With all the high costs attributed to doing business in these Islands, one has to wonder how the businesses survive.
You are a dummy. Gas prices is hampering any economic recovery. Look at your CUC bill next time and you will see who is making the money. Dealers are barely surviving in an economy dominated by foreigners. So if a Native Caymanian get something in their own country it's a bad thing? Go fly a kite you back stabbing socialite.
Ahh, True, true, Johnny B. The ones benefitting are the ones getting the duty. Sadly they have no requirements to be efficient & reduce spending. Look at the real source of the increases…and the high COGS in GC.