We read with interest an article in the Wednesday, 8 November, Compass and your own editorial, which indicated “it is time that we, as dealers, reduce the prices on the pump”.
The article went on to say that we are making in the range of $1.78 per gal profit on fuel sales. If this were the case, as attributed to our own Premier as having said, it’s no wonder that gas stations were targets of robbers for a sustained period over the past couple of years.
We write to inform and assure the public that this indeed is not the case. There has never in history been a good margin for dealers on petrol in Cayman, and this goes back to the days that both of our parents ran gas stations in Cayman. It was always well known that the c-store subsidises the petrol sales and the fuel sales are mainly an attraction to the premises, as well as providing a much needed service and outlet for the product. When fuel prices shot up to over $4 a gallon a few years ago, this put added pressure on stations to maintain decent margins. Now, believe it or not, most stations are struggling to keep going, having to make cutbacks in staff and expenses and looking towards self serve only as in the US.
We would like to clarify a few important things when it comes to gasoline pricing when comparing Cayman prices to the united states:
Cayman stations dispense fuel in imperial gallons (20 per cent more fuel).
Cayman does not sell regular grade gas (lowest grade is premium, this adds 19 cents per gallon)
Duties of 85 cents CI$ per gallon for gasoline.
Self service United States prices versus full service prices for Cayman (add 50-53 cents per gallon for full service in the US if you can find it).
Very high cost of conducting business in the Cayman Islands, eg. electricity, some stations paying over CI$12,000 per month.
The Port Authority fees.
Bulk fuel distributer annual license fee of$125,000.
Low volumes of fuel consumed in the Cayman Islands equals higher shipping cost (having to share tankers with other countries to fill tanker) and higher margins at the pump (low volumes to cover cost).
Mandatory pension and health insurance required in Cayman. 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 per cent to 20 per cent margin (the accurate figure) is not something to boast about, nor is it one that can sustain a business that must pay staff expenses, as well as licences and the normal overheads of water, power and phone services. C-stores have therefore always been an expensive convenience (in the Cayman Islands and all over the world). Also of late, security systems and staff costs have risen dramatically, and negatively affect business returns. Many also open 24 hours a day, seven days a week (this is the convenience factor), so that one can grab an item quickly or get one that was forgotten while shopping at the supermarket or discount stores. This added markup in c-stores is what subsidises the fuel sales and allows gas stations to survive.
Gas stations and dealers also have the added disadvantage of no credit terms on fuel from wholesale suppliers; however, we do in many cases offer credit to our many good long standing customers to remain competitive. This credit is usually over a month or five weeks and hence we encounter a natural cash flow in-balance.
High fuel prices also negatively impact our businesses in the following ways:
Consumers reduce their fuel consumption (less gallons are sold; fuel markup based on cents per gallon and not a percentage).
Requires more operating capital (bank overdraft).
Credit and debit card fees based on a percentage (higher price equals higher cent per gallon fee to the bank).
Fuel margins based on cents per gallon and not sale price.
We are not looking for pity here; this is a business we have chosen to operate; however, we would like your readers to know that we continue to do our best to absorb rising cost and only pass on what is absolutely necessary, to allow us to survive and make a decent return on our investments. This is, after all, why we are in business.
It is, we feel, unfair to suggest that the big bad wolf in the room are the 21 petrol stations that are doing business in these Islands. We are paying our way and are also struggling like many others.
What should be looked at is the high cost to the whole fuel supply chain. Government policies significantly adversely affect the cost of fuel and these are the areas where the media and public need to direct their attention to.
Finally, Mr. Brown would also like to clarify that he did not speak to the Compass as the article indicated, and words and statements attributed to him, were not correct.
Johnny Brown (Brown’s Esso)
Osbourne Bodden (Lorna’s Texaco)
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