 Hello and welcome to Issues and Answers, a production of the Government Information Service. I am your host, Jacques Kingston Compton, and today we're talking about gas prices and how they affect the economy, how they affect people's lives, and what in turn affects gas prices. And I'm here with managing director of Jean-Marie & Sons. Most of you may know him. It's the Everestess Jean-Marie. Welcome to the program. Thank you very much. Well, let's just start immediately. I want to know from your perspective as a business owner, a gas station owner, how are gas prices determined? Okay. There are various elements in the build-up of gas prices. Perhaps the most important one is the price at which the product lands in the country, which is called the landed price of it. And the other elements are the excise taxes government applies, the wholesalers margin, which are those wholesaler importers, who are the operators who bring the product into the country. And then you have the retail price, the retailers, who are the ones selling the product at the various gas stations. And they have margins as well. So you have the landed price, the excise tax, you have the wholesalers margin, and the retailers margin all together makes the retail price of the product at the pump. So the landed price, how is that determined? Okay. So the landed price... So the landed price... So the land price is outside? That's from outside. That's the excise tax that we have absolutely no influence over that. But that is very much influenced by the price of crude oil, generally. That's the base product from which refined products are derived, which is, in our case, you have gasoline, diesel, and LPG. And in some cases, of course, jet fuel, which is less pertinent, I suppose, to the average consumer. Generally, one would agree that if the price of crude goes up, those products would in fact go up because it's the base product from which these refined products are built up. But some of these refined products are more influenced by changes in the price of crude. Because in the case of gasoline, a barrel of crude oil would account for about 49% of gasoline and 29% of diesel. So the relationship between gas and gas prices and crude prices will be more apparent because it's a greater component of crude oil in the gasoline as opposed to diesel. And then you have from that, from the base price of crude oil, you have distribution costs, you have transportation costs, you have handlers in all those middlemen involved which built it up. And it's quite a significant part. In fact, it's a greater element of the landed cost of the product in solution. But also I understand that the price of crude oil might not necessarily get gas prices up or down. For the same reason I told you that there are bigger elements that could overshadow the price of crude. Okay, you may have a situation where the price of crude has gone down, but these other factors which account for a significant portion could be going up. So you have crude going down and these other factors like insurance, transportation, distribution become very, go up, the price of the land price, the price of the product will go up, even when the price of crude is going down. So I mean there are many variables at play there and it's not very obvious what is influencing the price at any one time. But generally I think it's fair to say that if the price of crude is going up, the price of refined product will go up. In fact, refined will take advantage of the fact that if the inputs are going up, they'll bring the price up. Now, I mean people would notice that even before the Russian-Ukrain conflict, gas prices were going up. Like I say during COVID. That's a two-part question. Why was it going up during the COVID era and why what factors affect the price of it during wartime? Okay, so what we have as we were coming out of COVID, you had an increase in general economic activity globally and the big driver of economic is energy costs. I mean that's a big component. So the demand for oil and energy goes up. So it's a case of economics. The demand is going up. I mean when the supply is not catching up, the price will go up. What has happened with the Ukraine conflict is that you've had Russia as a major player. It's been squeezed out and so you have the supply being constrained and of course the consequence of that is the prices are going up and then you have the fear of the uncertainty that dealers have. I mean I'm talking about people who are trading in oil of worst case scenarios and people are buying stuff or trying to store stuff and which is driving the prices up. Where do we get our crude oil gas from? Yes, we used to get our product from Trinidad but that has stopped. Surprisingly, I think that's coming out of the U.S. because Trinidad doesn't have a refinery to do a refine crude. So that product comes from the U.S. which the Shell and Sol are able to bring into singlution. Is any specific part of the U.S. or? I am not sure exactly where but I suspect somewhere along the East Coast they may be getting the product from. I'm not sure. So it's mainly from the U.S. is there no percentage of it? Okay, I see that. That's actually pretty interesting. What else I have to ask is do you find that people understand that you as the gas station owner, you don't set the prices where you get a lot of people coming to you and saying why is my gas so high? Why does it cost $40, $50 more now for me to fill up? I mean I still find it rather strange that even now I mean enough discussion hasn't taken place around gas prices but still many people don't quite understand that even when prices are going up that he has nothing to do with the dealer. But then again I could understand from the point of the consumer that when you're paying more money you're paying it to the gas station operator and the perception is they're getting it. But what people are not seeing is the back end of this that the dealer is paying more for the product now and his margin doesn't change in terms of dollar value. He still gets his dollar 10 per gallon but he is paying more and in fact when the price of product goes up it is bad news for retailers, surprise me it's bad news because right what happens? You love less people buying. Well the demand drops because your profit or your revenue is a function of two things. Your margin what you make on the dollar and how much cash you sell and when prices go up people consume less so you sell less and of course your margin is well but it remains at a dollar you have to put out more money than before to get that dollar. So if you used to be $15 for a gallon of gas now you have to be $16 to get that same dollar. So in terms of percentage terms your margin is dropped so it's not something you want to do because the consequences of that is when you buy products I mean a truckload of gas like could cost you $85,000 in one go. I want to just stop you there for a second we're actually due for our first break. You're watching issues and answers please stay tuned we'll be back in a moment. Everyone says counseling, counseling, counseling. I don't have a chance. I have no chance. Maniglasia, just yesterday you asked me advice about your husband and we spent over an hour on the cell. That's counseling. I don't want to do anything. When you're having difficulty with someone you ask your friends for advice to help you to deal with your problems but wouldn't you prefer getting advice from a professional counselor? I hope you're not one of those who think counseling is for crazy people. When you're situation keep being weird I'm going to use professional counseling but Maniglasia is on the condition of doctors visit. Don't you know the Ministry of the Public Service has an employee assistance program they call EAP which is offering six free counseling sessions for government employees. Eiglasia, why don't you take advantage of it? Really? It's free. Let me often let me call the EAP unit ASAP because I want professional, did you say free? Free counseling. But Maniglasia is free. Call the EAP unit at 468-2269. EAP works, let it work for you. Welcome back to Issues and Answers. I'm your host, Jacques Kingston Compton and we're talking gas prices with Managing Director of Jean-Marie & Sons, Mr. Everestus Jean-Marie. Before the break, you were talking about how the price of gas can affect your profit margin. Yeah, I was making the point that it's not a good thing for dealers. In fact, dealers are rallying if the price didn't go up because when it does go up, the amount of money you have to that's tied up in the growing stock, the value that goes up and invariably you have to go find additional working capital to keep the business going because you tie up money there and it affects your overdraft and your cost of running the business. So, according to what people believe, when the price of fuel goes up this is bad news for retailers. And as you mentioned before, people buy less gas. People buy less gas? When the energy goes up. Correct. But I guess funny enough, because we're in a tropical country we don't have it as bad as let's say somewhere like the U.S. or the U.K. like this winter. Oh yeah, exactly. Heating costs, yeah. Yeah. So, who are your customers? When prices go up, who does that affect that we're talking about? Because you have persons who, I guess drivers, you have persons who buy your LPG tanks. Well, I think the people who hood quite badly I have to say is minibus operators because it's the single largest cost of the operations, if you will. And they are more or less constrained by the fact that they couldn't charge so much for their fares. Their fares are regulated. So you have a regulated fare which you cannot depart from and your costs are driving up significantly and squeezing your margin. And in some cases it can make the whole business unprofitable. And I think that's one of the biggest challenges that this sector faces that costs the cost of fuel which is a significant part of the operations. They have no control over it and it keeps going up and squeezes their margin to the point where the business is not viable. Probably some of them are thinking is it even worth it to... Yeah, and I know that. And in fact that was particularly so just after, still in the latter part of the COVID period there where there are still restrictions. So you couldn't even put, you couldn't have a full load of people. So you had your costs gone up, you can't get the fare up and you have fewer people on the bus. I think many people just packed up, took a holiday because it's just not viable. Because you have heard their complaints. I guess most people have heard their complaints. But you mentioned that the price is regulated. Is it possible, is it a case where they would have to dialogue with the state? Yeah, that's the thing which in the same way like dealers have to from time to time we got to sit at the table and speak to the Ministry of Commerce and make a case for an increase in margins. I think they have been doing that with the Ministry of Transport. I think if not this month I think July you may see an increase in bus fares. Yes, actually yes, I think from quite possibly next week. Okay. Do you have any idea of let's say how much person solutions possibly spend on gas let's say per annum or per month or anything like that. I'm trying to figure out just how large a part in the economy that that plays. What I can tell you is that what the consumption level is on a macro level. I think right now it's somewhere in the region of about 1.1 million gallons of product has been consumed a month. So that's significant which in retail prices about $18 million in fuel is spent. So that's a big part of the economy and it impacts so many other things especially in the distribution of business. So when it goes up the price of food goes up. Bus fares are beginning to show up. That's interesting you brought that up. I think a lot of people don't want to understand why the price of gas affects other things like food prices. Because it's the cost of energy. I mean to get things around the place you need to expend energy and it's our major source of energy and that's why it affects so many things. In the case of electricity it has its implications there. The only thing is Lucillic has adopted an approach more from the point of trying to keep electricity prices stable lock themselves into agreement to buy diesel at a certain price for a period of time. Sometimes it's actually more than the market price. Sometimes it could be less. But the more important thing for them is to have some stability in terms of electricity prices. Do you find yourself in a situation where also people are buying less cooking gas as well as I know they buy less fuel as well but do people buy less cooking gas? This is so basic that I don't think I would say that people still have to buy and have to cook and it's not something that is discretionary. So unlike having your car and say okay I'm not going to make that trip it's a little more difficult to say I'm not cooking. So it is not as sensitive I would say to prices in terms of the consumption level as fuel, gasoline and diesel. Because you could I suppose with regards to your fuel you could couple if you wanted to. You have options. In the case of cooking gas your options are few. Do I think there are people who I would talk of people going back to coal or something like that which is what you don't want to be burning wood. But I would say cooking gas is less sensitive in terms of usage than gasoline and diesel. I have heard people make jokes about how they possibly going to go back to coal if these prices keep going up and up. But we're actually due for our second and final break. So stay with us. We'll talk a little bit more in our final section. You're watching Issues and Answers a production of the Government Information Service. Please stay tuned we'll be back in a moment. We consume and we don't spare a thought for the damage that they'll do. No. Think about the children. Think about the children. How will we save them? It calls and GMOs are not the solution. Use organic and join. Excessive agrochemical use, additives and genetically modified foods are harmful to health and the environment. Join the Good Food Revolution. Grow, buy and consume organic. A message from Rye St. Lucia and the Ministry of Sustainable Development with funding from the GEF Small Grants Program, UNDP. Welcome back. You're watching Issues and Answers and we're talking gas prices with the Managing Director of Jamari & Sons, Mr. Everistus Jamari. I want to talk about government subsidies. How viable is that? Especially now because obviously we've suffered from COVID. The government has been receiving less income. I guess we're sort of recovering now. But how viable an option is government subsidies? It is not something that's sustainable. But I think in some cases it may well be necessary. Looking at the data that's available now, governments seem to have adopted a policy of having a zero-tax collection on all children products. While they are subsidizing cooking gas, the 20-pound cylinders of gas at a dollar something, a cylinder. There's also a slight subsidy of gasoline, which is about 44 cents a gallon. But they are collecting about a dollar 27 on diesel. So you see in some areas they are collecting, others they are not collecting. But I think the net effect in terms of revenue loss and revenue gain is zero. So diesel now seems to be more or less subsidizing cooking gas and gasoline. So the government's position is a zero position where it's not fucking out money to subsidize cooking gas and gasoline. And perhaps that's the fairest way I think the approach we want to take because the government cannot realistically go on fucking out money to pay for people's fuel. Because the negative effect of doing that is to shield people from the realities of economic life is to stop them from realizing that they need to adjust their way of spending, which is not what you want to do. But you also recognize that some things are basic and affect people in a very serious way and you need to provide some cushioning. And cooking gas is a classic case where the government need to provide because it affects low-income people disproportionately. And that's why 20-pound gasoline has been targeted specifically and not the 100-pound. Because the user of 100-pound invariably is a high-income person. Or it's a business owner. Exactly. And they have means of counteracting these things. If you're a business, well, there's certain costs you need. You can change. If you are above average income person, well, you may be able to take the additional cost. But the normal user of a 20-pound is probably at the low end and therefore needs the assistance which they are getting. Do you think there is a space for both clean energy and oil to coexist? They have to for a sustainable future. I mean, we talk about clean energy and doing away with fossil fuels. That's not going to happen in our lifetime. Unless the technology really changes in a dramatic way. Because our whole infrastructure needs to change overnight if we are to adjust. It's not going to happen. I mean, the opportunities exist. I mean, the greatest impact could probably come from somewhere like Lusilec as a provider of energy. But even they would talk about solar panels and things like that. People talk about that as if it's some easy solution. But the amount of land space these things take in a small country, it's just not viable, quite honestly, to put up those solar panel farms. That takes a lot of land space to produce electricity. And a lot of infrastructure. And, you know, I don't want to be cynical about this, but I mean, these small islands don't contribute in any meaningful way to climate change. That's the interesting thing. Because with small island developing states, it's really the industrial kind like the US, Europe, that expel the largest amount of CO2 to the atmosphere. Yet it's really, because of climate change, it really affects us. And we affected disproportionately by it. And first to radically change our ways is like almost saying, you're going to make no difference to it. So you have to ask the question. We have, you know, our way of life in the hope that things will change. We'll contribute to improving the world's position regarding the use of fossil fuels. But I think there's a moral obligation, having said that, to get people to become a little more conscious of the way they use fossil fuels. And hopefully the one day the technology will be such that it might be a very feasible thing to move across. As it stands now. It's interesting that you mentioned that, especially with regards to viability, because I've had this conversation with the persons before that the technology, at least for electric cars in a country such as ours, we're not Barbados, which has, I get miles of flat road. We're a hilly country. So it might be a little impractical for everyone at least, and we should have electric vehicles. And there's another dynamic that's yet to take effect. This is like the UK, another industrial country. I've had firm dates to stop the production of vehicles using gasoline and diesel. Where do you think those vehicles are going to go? You remember the year when we had those Japanese cars just being dumped there? Yeah, yeah. I think a similar thing would happen where those vehicles would be so cheap. Yeah, what I'm saying. Those vehicles would be so cheap that the temptation to bring them in is going to be strong because they're not going to produce in the UK anymore. Everybody's moving across to clean energy and these vehicles become very affordable and they won't be bangers. They'll be good vehicles. So there is that as well. I just don't see it, but it's not a politically correct thing to see because everybody wants to be environmentally conscious. But that's the reality, and I think we need to be honest with ourselves that solution is nowhere going to get across completely to clean energy. So what do you think about the future of gas prices? What do you think is going to happen? In your opinion, down the line? Well, the forecast right now is that if anything, it's going to go down. And the reason for that is because of the inflationary pressures around the world, a lot of central banks now think that as a major issue and are going to take measures to slow down the rate of increase, by increasing interest rates. Now that will have the effect of slowing down the economy. And if you get a slowdown in the economy, then the demand for fewer energy goes drops and of course crude oil, crude, everything drops and of course the implications are refined products, prices will drop. So as we stand now, all the indications are that the trend globally is for the economy to begin to contract, globally come to contract and for a reduction in the demand for energy as a consequence will lead to a reduction in the price of crude and related petroleum products. Okay, we're actually coming very close to the end of the program. Is there anything that you want to add or end with? Well, I suppose what people would want to do, what do we do in circumstances where these prices are becoming overwhelming? And what I would say for motorists, some basic things you can do. Running your car in AAC does consume more fuel. If you can avoid it, avoid it. Driving at excessive speeds doesn't help, you use up more energy. So be moderate in your driving. Look after the vehicle and ensure that it's well serviced because if it's in poor condition it will consume more energy than it needs to. And drive your car with the tyres that are well-inflated because they're not well-inflated. The traction now on the roads means that more energy needs to be consumed. And in the worst case, share a car if you can't share a car. Couple, yes. That's actually really good advice. I might end up doing that myself at some point. As inconvenient as it may be sometimes too. Because sometimes you'd rather be travelling on your own because you know what can happen with that. Person who wants to be dropped outside the door, you have to go off your route. So it's a cost probably. Well, you will have to share. Yeah, you just have to share the cost, that's all. I want to thank you very much for coming on our program. I think you may have educated a lot of the public on how these things affect your business, how they affect the rest of the country, the economy, food prices, supply chain, all that. So thank you very much for that little bit of education. I hope we can have you on the program again at some point in the future. Anytime. Okay, thanks Jack. No problem. You're watching Issues and Answers, a production of the Government Information Service. I'm your host, Jack Henson Compton, and you can watch this program as well as other government-funded programming on the National Television Network, on our social media channels, Facebook and YouTube. Thanks for watching.