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JGRA, marketing company quarrel escalating again

Published:Wednesday | May 6, 2015 | 12:00 AMCamilo Thame

Rubis Energy Jamaica is still pressing its retailers to upfront cash or collateral in order to continue receiving fuel and other products, counter to a previous agreement, according to the Jamaica Gasolene Retailers' Association (JGRA).

The lobby group said that its members who operate under the Rubis brand had reached a verbal agreement with the international marketing company, after months of negotiations seeking alternatives to new terms that would require them to provide bank guarantees before gasolene would be delivered to their pumps.

"Having protested, government intervened and Minister [Phillip] Paulwell allowed the parties to have discussions," JGRA President Leonard Green told Wednesday Business. "Rubis agreed to withdraw terms, but when we wrote to them to confirm our understanding, they did not sign the document."

He added: "Rubis started to call the dealers last week. I can count six so far - to tell them that if they did not renew their guarantee, they would not get any fuel supply."

Getting bank guarantees requires substantial amounts of assets, given that the petrol business is a $100-billion-a-year industry in Jamaica and even cash is not fully collateralised - that is, just up to 90 per cent of cash can be used as collateral. Rubis controls approximately 36 per cent of the local gasolene trade.

"This puts the dealers in a very unprofitable situation," said Green. "Having to absorb those costs gives them less latitude to get working-capital funding, which will be needed in an environment in which prices are going up."

Up to press time, Rubis had not responded to questions that were, as requested, sent to it in writing.

At an emergency meeting held on Monday, JGRA members who operate under the Gulfstream Petroleum (Texaco) franchise also chimed in. They complained that the marketing company's handling of divestment of sites to existing dealers has been troublesome.

"Over 40 dealers expressed interest in buying their sites," said Green. "What has emerged is that there is no standard procedure for divestment."

He said Gulfstream was asking dealers to pay widely varying prices to acquire gas stations with comparable volume, business potential and square footage.

"There is no consistency in the pricing of the asset," said the head of the lobby group. "Dealers are asking for baseline information on the procedure as to what to expect."

Gulfstream CEO Mauricio Pulido clarified that his com-pany was not undertaking a wholesale divestment of its service stations, but rather, it was engaging some existing retailers to transfer ownership of those assets in a deal that would lock them into a 20-year supply contract.

"This model is used consistently around the world," Pulido told Wednesday Business in a phone interview yesterday. "We have established pricing for the assets and we have been successful with about five retailers."

The long-standing issue of margins being charged by marketing companies emerged once again at Monday's meeting.

The gas retailers accused all three multinationals - including Total - of tacking on additional margins on to Petrojam's weekly price increases.

"This practice by the multinationals has resulted in driving up of prices at the pumps," said Green. "Multinationals are carrying up to two times the margin that the retailers are getting."

Petrojam sells its gasolene to marketing companies at $113-$115 per litre depending on the grade of fuel, while retailers sell it with up to a 21 per cent mark up. That means that marketing companies are taking up to 14 per cent for themselves in some instances, according to JGRA pronouncements.


Pulido said that the local petrol industry is a free market.

"Every component of the chains has the right to establish the price they believe is competitive," said the CEO of Gulfstream. "We move with Petrojam. On some occasions, we may make a different adjustment, but that is a corrective measure which is being applied."

Nevertheless, he said his company keeps 40 per cent of the margin, on average, leaving the remaining 60 per cent to the retailers, although it varies by location.

"There is a whole structure to manage all the sites, comply with health, safety, and controls for transportations," added Pulido. "There are a lot of components of the chain that others don't realise exists."

JGRA also argues that marketing companies don't pass the temperature adjustment rebate given by Petrojam on to retailers.

"When the product is hot, it expands, and when retailers put it in their tanks it contracts," explained Green. "Dealers have to take on evaporation, which can be up to one per cent."

More gas retailers are moving on to local franchise arrangements. Of the 18 marketing companies operating in Jamaica now, 15 are local, with the latest addition being FESCO.

The JGRA wants the Government to begin creating a legislative and regulatory framework for equitable contracts in the petroleum trade.