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Fuel fury - Shutdown of petroleum sector looms

BY CONRAD HAMILTON Observer senior reporter hamiltonc@jamaicaobserver.com

Tuesday, September 04, 2012    

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A lockdown of the local petroleum sector is looming as furious industry stakeholders intensify calls for Energy Minister Phillip Paulwell to intervene and plug gaping holes which they say are making their survival increasingly difficult.

The peeved stakeholders include petroleum tanker drivers, haulage contractors and service station operators, all of whom point fingers at petroleum marketing companies, which they claim are walking away with huge profits while the rest of the sector struggles as a result of policies they have imposed.

It is against this background that the stakeholders are joining forces to lobby the Government to introduce legislation which they feel will create a level playing field.

Their concerns have heightened in the wake of recent moves by one marketing company to terminate the contracts of several service stations which reportedly failed to meet performance targets it had set.

The threats of closure sent shockwaves through the petroleum retail sector and resulted in several meetings involving the Jamaica Gasolene Retailers Association (JGRA). Out of those discussions came plans to implement a wide range of cost-cutting measures in order for them to remain afloat. The termination of the jobs of scores of pump attendants and other workers was among them.

It is a last resort for JGRA President Trevor Heaven, but he said it will be inevitable if the Government fails to address serious anomalies relating to the policies of the marketing companies.

"We don't want to raise prices; in fact, we can't. And we don't want to dislocate our employees, but we need equitable margins to take into account factors such as shrinkage (evaporation of a portion of the product)," he told the Jamaica Observer.

Shrinkage, according to one industry expert, normally occurs in the transportation of fuel from one location to another, or in the process of filling up at service stations.

Another issue with which the sector grapples, added Heaven, was that service station operators who lease properties from marketing companies, and who seek to diversify their income, are faced with strong resistance.

"The marketers should allow retailers to use the facilities to explore other income-generating activities. The moment you decide to go into a tyre sale venture or any other service on the property, you are told how much you will need to pay," Heaven said, describing the lease agreements as onerous.

"We have never seen this level of fallout before, and it speaks to the fact that the business itself is becoming more and more challenging," said Heaven, who told the Observer that he would be meeting with other aggrieved stakeholders before approaching the energy minister.

For Corporate Area service station operator Dwight Moore, the blame lays at the feet of successive political administrations which have failed to nip the problem in the bud by introducing legislation to level the playing field.

"We want a win-win situation, because we understand that they (the marketing companies) made an investment when they decided to come to Jamaica, and we fully appreciate the need for them to capitalise on that investment. However, the existing legislation favours them, as they are able to set margins without sharing any of their benefits with service station operators. We get the product at near commercial rates and then have to resell, despite us bearing the brunt of costs associated with product shrinkage, security, etc. These costs erode what you make on the product. What we need is equity," Moore declared.

Despite several efforts, the Observer was unable to speak with representatives of two of the major marketing companies operating in the country.

Energy Minister Paulwell was also unavailable as he was said to be off the island. However, a senior official of the Ministry of Science, Technology, Energy, and Mining acknowledged that the ministry was aware of the charges against the marketing companies.

According to the officer, a comprehensive review of the local petroleum retail sector has been completed, and will lead to a raft of changes relating to issues such as safety, transparency and competitiveness.

The technocrat explained that the measures will also result in the creation of a level playing field for all the stakeholders, including haulage contractors, tanker drivers and the petroleum marketing companies. The Observer was also told that the proposed measures, some of which are likely to be legislated, are in keeping with the overall thrust to modernise the local petroleum sector.

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