Fines, jail time threatened for non-compliance
Proposed changes to Cayman’s laws governing the handling or storage of dangerous substances will require all fuel importers to provide detailed information on their operating costs to government’s regulatory agency.
Initially, Planning Minister Kurt Tibbetts, who has responsibility for the Cayman Islands Petroleum Inspectorate under his ministry, said the price reporting requirements would be included as part of a new Public Utilities Bill expected to come before the Legislative Assembly in November.
According to the Dangerous Substances Handling and Storage [Amendment] Bill, 2015, as proposed: “The chief petroleum inspector shall … collect from importers, and compile, analyze and abstract, information on fuel prices and pricing methods and provide such information to the minister.”
The minister in question would be the elected official placed in charge of the petroleum inspectorate. At the moment, that is Mr. Tibbetts.
At the request of the petroleum inspector, the importer is required to provide information on the price of all fuel imported and sold and the “pricing methods” used by the importer in the sale of fuel to [retail] operators and consumers. Those costs can include: initial costs, cost of freight, insurance and brokerage fees, customs duties, estimates of fuel in stock, and the amount and type of fuel to be imported in the next shipment.
The legislation proposes a $20,000 fine or imprisonment for one year, or both, for anyone who fails to provide information or who provides false information to the government inspector.
In addition, the bill would allow government to sue the importers to force them to provide the information required.
Minister Tibbetts has often spoken of his desire to place some financial reporting requirements on Cayman’s two major fuel importers. He did not return calls from the Cayman Compass about the amendments to the dangerous substances bill.
Historically, fuel companies Esso and Chevron-Texaco, and more recently operators Sol Petroleum and Rubis, have refused to release such data as would be required by proposed amendments to the Dangerous Substances Handling and Storage Bill, saying it is proprietary commercial information.
Mr. Tibbetts said in August that government regulators must have a clear idea of what the companies are charging local retailers for fuel before they can make any assumptions about “fair” local prices at the pump. In addition, Mr. Tibbetts said regulators must have that data to determine whether Cayman’s two petroleum distributors are actually in competition with one another.
“If it is determined that the market is not competitive, as I suspect it will be, then the government will promote and ensure effective competition,” Mr. Tibbetts said. “If these measures fail to ignite price competition amongst the participants … then the government’s next step will be outright market price regulation.”
Price control legislation for local retail gasoline and diesel fuel is something petroleum distributors have long warned the government against, stating that it could lead to fuel shortages in the market. In January, Alan Neesome of Sol Petroleum urged the government to reconsider taking such a step.
“In a regulated market, the regulator [government] must guarantee a reasonable return to the regulated industry,” Mr. Neesome said. “Sol shares the government’s objective of making fuels available at competitive prices, and the current free market in Grand Cayman is undoubtedly accomplishing this objective.
“Pump pricing here overall [has] decreased substantially, in line with international pricing, whereas prices in other jurisdictions in our region, especially those with regulations, are in many cases higher when compared to the equivalent price per imperial gallon for the same product.”
Cayman’s fuel market has the tendency to create pricing oddities, as was observed around Grand Cayman last week. Rubis retail outlets started dropping their prices on Monday, Sept. 21, at various locations, ending Thursday at an average of $4.37 per gallon of regular, unleaded gasoline at stations in Bodden Town, George Town and West Bay.
Meanwhile, as of Thursday, Sol Petroleum-supplied stations posted an average $4.69 per gallon of regular unleaded in the same areas. The same prices were recorded during the last Petroleum Inspectorate review on Sept. 11.
The disparity created some unusual situations among competing stations Thursday. For instance, in Bodden Town, Lorna’s Rubis advertised its regular unleaded price per gallon at $4.38 and its premium per gallon price at $4.94. Just down the street, Mostyn’s Esso advertised $4.69 a gallon for regular, unleaded – 31 cents higher than Lorna’s. However, its premium price was $4.79 per gallon – 15 cents lower.
Mr. Neesome said the variance in prices could be explained via a number of factors, the most likely being that Sol Petroleum imports its fuel independently from Rubis, therefore fuel delivery times are different and so are the prices charged on a particular shipment.
“The wholesale price from Sol to our customers reflects the inlaid price of inventory and changes as existing layers of inventory are exhausted, but it is also subject to competitive market forces,” Mr. Neesome said. “Sol does not set the price at the pump. We can make recommendations but the service station dealers are all independent Caymanian businessmen and women and they are free to set the price.”
Also, with the most recent price drop, Sol “recognized” market changes only as recently as last Monday, Sept. 21, Mr. Neesome said.