AN INCREASE in gas prices will be the inevitable effect of an approximately 660 per cent rise in retail petroleum licence fees announced on Tuesday by Dr. Omar Davies, Minister of Finance and Planning.
Retailers told The Gleaner yesterday that the increases would have to be passed on to consumers because they are already faced with hard times in a competitive market which is likely to get tighter next year when the increases come into effect.
The hike will see Retail Petroleum Licence fees rise from the current range of $1,500 for Grade 'A' service stations (240,000 gallons and over) and $450 for Grade 'C' stations (under 120,000 gallons), to $10,000 for a Grade 'A' licence and $5,000 for a Grade 'C' licence.
According to Lloyd G. Brown, president of Jamaica Gasolene Retailers' Association (JGRA), this is an increase of over 660 per cent.
"This has to be reflected somewhere; a dealer cannot just absorb such an increase," he said. He argued that the increase would be unfortunate, as the consumers would have to face price increases in petroleum costs.
"We operate in a tight margin with marketing companies. They set prices and, in normal day-to-day operations, retailers lose out. With this increase, there is very little latitude we have but to pass it on to the consumer," he said.
Retailers are already having a difficult time with relations to marketing companies which are selling to the public, just below the price they sell to the retailer. And to compete, retailers are given a "suggested maximum retail price" which only allows them a seven-and-a-half per cent mark-up. This, he says, is hardly anything for the retailer to survive on. The JGRA president noted also that they were already in difficulties trying to settle wage negotiations for gas station attendants.
Many petroleum retailers are also in disagreement with the new tax announcements made by Government, and according to one retail dealer who requested anonymity, "It is unfortunate that the Government was focusing on the formal business sector for the raising of revenues."
Fuel, he says, is steadily increasing, and it therefore causes tremendous strain on dealers who have to operate on virtually controlled prices because of the dynamics of the petroleum market in order to remain competitive. "We are part of the formal system, which is evidently being targeted by Government," he said, and for this reason, many might be forced to close down.
