*Editor’s note* The views expressed in this commentary are not necessarily those of DNO or our partners.
RUBiS’ employees are staring at the breadline. Today, it is RUBiS’ employees; how can we, as a country, stem this tide in an increasingly challenging economy? What alternative employment are available to those persons?
Are the issues transparent?
RUBiS is saying that its operations are not profitable for a government regulated-price petroleum importation and distribution business[1]. The Government is implying that it is profitable, and further implies that RUBiS just wants more profits.
RUBiS is also saying that the government agreed in 2021 to the implementation of some changes to the regulated prices aimed at partially and progressively restoring profitability. This ought to have started in late 2021 and continue in the 1st quarter 2022. RUBiS is saying that the government has not kept its promise for further actions to restore… profitability[2] and a year on, cannot continue to operate in that manner. The Government is claiming that there has been one increase this year and accuses RUBiS of wanting the government to “give … an extreme increase in the profit margin in one-fell stroke”[3]. Clearly something is amiss here. The Government further blames the impasse on the Russia-Ukraine war and implies that RUBiS is not transparent or forthcoming in providing information to the Ministry of Trade.
There was not a transparent response by the Government with respect to RUBiS’ allegations that the current price structure results in unsustainable business of petroleum importation and distribution in Dominica.
A fair pricing structure should be transparent both to show reasonable profitability, and in allowing any capable member of the public to be able to consistently follow the logical result with the changes in world petroleum prices. I am not aware than any independent person can do that.
In other words, the Government ought to be able to provide to the general public the method – calculations / formulae / tables – which it uses to arrive at the regulated maximum sale prices for petroleum products. Then it has to demonstrate that the sale price is sufficiently above the supply or acquisition cost for there to be profitability. One is to expect that RUBiS and other similar operators would have already presented reasonable data to the Ministry of Trade in order to show that the current regime of prices does not result in a sustainable operation of this industry. The government has not indicated the expenditures that it considered not part of petroleum importation and distribution business that is responsible for the alleged lack of profitability of these businesses.
Is There a need for an Independent Regulatory Commission?
Clearly, if as the government implies, RUBiS is not transparent in providing information in order that the Ministry of Trade can set a transparent pricing policy to enable profitable business in that sector, it could show that the other operators were profitable based on what they supplied. But the other operators are, until now, silent, presumably hoping to reap benefit from RUBiS’ gain or demise. Is the information sought from RUBiS a bit beyond what is required to develop a fair pricing policy? Or, is RUBiS apprehensive about providing information that would amount to trade secrets to persons without a strict legal duty to confidentiality?
There is much wisdom in having an independent regulatory commission to decide on a fair pricing structure. This has seemed to work for electricity and telecommunications. Clearly, politics and political maneuvering would not be a factor in setting and administering fuel prices. Or even, I dare say, neither would the use of public office be perceived to be used for commercial gain and business insight – real or perceived that can be a major concern.
But the question remains, what is the benefit of regulating the price if it is pegged at a level that it does not attract good quality businesses that can deal with the real risk of operating such business, including emergency fuel capacity and health and safety.
We must also examine whether there is any benefit in regulating fuel prices at all. The price of cheese increased from about $11.00/lbs to about $16.00/lbs as a result of the impact of COVID-19 and the Russia-Ukraine war. Lumber, at one point increased by 300% over 2020 prices. Is the Ministry of Trade stopping the supermarkets or hardwares from selling these products at a profitable margin? The market forces and the ingenuity, flexibility and resilience of a company will determine who stays in the market of a particular industry.
What is enough profit?
The Prime Minister commented that RUBiS wants more profit, “It’s not that we are selling the petroleum products less than what it is imported into the country, but they are asking for an increase in the profit margin”[4]. What is a reasonable profit?
The government of Dominica has set a yardstick at profitability for price-regulated businesses by guaranteeing DOMLEC in its sales agreement a profitability of 15% in the establishment of electricity rates. Electricity and fuel are both part of the energy sector.
It would therefore be unfair for any other price-regulated business to be expected to obtain less, especially as these are two essential energy related industries.
Is Profit making a bad thing?
While we seem to champion entrepreneurship and encourage persons to be self-employed some simultaneously, when it suits them, look down on profit making as if it is a bad thing.
Any business which consistently sells below its costs is not sustainable. Business growth requires profitability. Government receives corporate taxes only from profit-making businesses.
Hence profits mean (i) sustainability – continued business and therefore employment, (ii) growth – new employment, and (iii) paid taxes to government – means more money for public services and sustained employment within government.
Is Government’s actions and inactions sustainable and in the best interest of Dominica?
With the largest share of the petroleum market, RUBiS would feel most intensely the impact of an unfair pricing schedule. If RUBiS does leave, then the other operators will bear increased operational losses which will quickly become unsustainable for them as well. The end result will be fuel and energy crisis as DOMLEC also relies on diesel fuel for optimum operations. If fuel supply is not reliable and the quality of the service is not at international standards, not only RUBiS will leave our shores, but other forward-looking companies as well.
What is the bottom line?
One may say that the Government’s behavior with RUBiS is reminiscent of that with RUSM. But is it? We have seen iconic manufacturing companies relocate their manufacturing externally while we now import Cocoa Cola, Kubuli, Benjo Seamoss and Bello Products that we sell in our supermarkets, bars and restaurants. How long can we sustain these job losses without the increasing the risk that more citizens of this beloved country may have to engage in more underground economic activities for survival, and ultimately descend into social decadence?
In the final analysis, with our small struggling economy, fuel sales in Dominica may be a very tiny fraction of RUBiS’ operations in the Caribbean, and certainly an insignificant part of its international business. RUBiS would lose very little to walk out – but not its employees, and not Dominica. The fact that the government’ says, “The government itself will be bringing in a significant quantity of gasoline and diesel and we will provide that to Petro Caribe,”[5] indicates that the government is aware that the other operators cannot meet the fuel demands of this market, at least in the short-term.
Ultimately, consumers have to pay for the cost of goods and services or they will become unavailable or at best unreliable. A responsible government ought to be asking consumers to be sensible in their energy expenditure at this stage, not creating the possibility of depriving the public of a reliable fuel supply.
In the end, the government has to allow sustainable prices to be paid to ensure that the supply is reliable. Whether we like it or not, fuel has to be sold at a profitable margin or no one will sell fuel locally, not even the Government!
What then would be the motive of, as it appears, pushing RUBiS out? Is there something more sinister brewing? Are there persons and entities waiting to replace RUBiS AFTER government has set fair prices? Who are the buyers-in-waiting for RUBIS assets? And will they be funded with CBI funds as happened in the recent past when an iconic operation was closed down?
There is no arguing the point, the economy is not doing well and this is no time to lose jobs on an ego-stick. Our government has to be held accountable for its stewardship.
[1] RUBiS Dominica Press Statement – September 15, 2022.. In particular, page 1 paragraph 2 and page 3, response to Q&A – What is causing such losses?
[2] RUBiS Dominica Press Statement – September 15, 2022.. In particular, page 3, response to Q&A – Why is RUBiS suspending fuel sales?
[3] Dominica News Online – Thursday, September 15th, 2022, “Prime Minister Skerritt responds to RUBIS statement on suspension of fuel sales”.
[4] Dominica News Online – Thursday, September 15th, 2022, “Prime Minister Skerritt responds to RUBIS statement on suspension of fuel sales”.
[5] Dominica News Online – Thursday, September 15th, 2022, “Prime Minister Skerritt responds to RUBIS statement on suspension of fuel sales”.
Good analysis and appropriate and cogent questions. I understand the risks of allowing fuel operators to set their own prices, but we did have that free market system for decades and it appeared to work fine. Maybe we should deregulate prices to some extent.
I say that the Government’s behavior with RUBiS is reminiscent of that with RUSM. We have seen iconic manufacturing companies relocate their manufacturing externally while we now import Cocoa Cola, Kubuli, Benjo Seamoss and Bello Products that we sell in our supermarkets, bars and restaurants. How long can we sustain these job losses without the increasing the risk that more citizens of this beloved country may have to engage in more underground economic activities for survival, and ultimately descend into social decadence? All this is a result of Skerrits failed policies. Corruption, a lack of competence by the PM, rising crime (on the streets and blue collar crime) and ongoing unfair election will be the end of the democratic state of Dominica.
Very good comment, Mr. Le Blanc!
Sadly, the Rubis employees on the breadline may be joining some of the Ross University workers who’ve been there since 2018 because things fell apart. But the workers and public are being offered Fool’s Paradise in this latest saga – the hardworking and understanding PM is going to “write to the French government” to report Rubis. Hopefully, this will resolve the matter. Note, this is a private company whose main objective is to make a profit. The PM’s announcement would be laughable if it weren’t so pathetic. “Leadership is everything” the red t-shirts proclaimed, in the run-up to the last elections. They were right! Indeed, leadership is everything.
Always insightful and asking the right/pressing questions to hold our leaders accountable.
The author used Cheese price increases in supermarkets to demonstrate market forces at play, however there are substitutes for cheese if customers find that cheese is too expensive for purchase at higher prices. On the other hand there aren’t substitutes for fuel as a source of energy for transportation in the country, therefore the need for government to ensure that the wheels of the economy keep turning by controlling the price of fuel. The problem is that the government doesn’t like bodies it can’t control, eg the integrity commission, so even if the idea of an independent energy commission is a good idea hence the reluctant to adopt such an idea. It’s a game which involves everyone so we’ll continue to watch the unfolding drama between RUBIS and Skerritt to see where it ends up.
I am not bought on that Rubis story because when I look at some of the owners of Rubis here it is clear that most of them are very close friends of the Skerrit cabal.
Take for example the one in Portsmouth. It is owned by Emmanuel Nanthan, who is the director of CBI passport sale and, the same gas station was mentioned in the Al Jazeera story that they wanted to turn into a laundromat bank.
Then there is the one in Jimit that has that temporary closure sign since a while now. Who owns it? I always heard it’s a lawyer friend of Skerrit even if their relationship might be a little sour now according to Chris who knows everything
So it’s hard for me believe what I am hearing. I just believe Skerrit had his hands on that Rubis thing longtime and now he might just be sealing the deal
In bold letters DNO Admin have exercised their prerogative in distancing themselves from this news item: “*Editor’s note* The views expressed in this commentary are not necessarily those of DNO or our partners.”
However, there was no such distancing in the speeches quoted in the formation of the Dominica-China Friendship Association. https://dominicanewsonline.com/news/homepage/news/new-dominica-china-friendship-association-coincides-with-need-for-building-dependable-diplomatic-relationships-says-skerrit/
Of the two, I consider the latter to be more disturbing and contrary to the feelings of Dominicans general and hence, warranted distancing.
ADMIN: This is not a news article it is an opinion piece. This is the standard disclaimer for any commentary.
In news articles we will often report what the speaker stated as matter of record neither supporting or opposing it – we do not normally place such disclaimers for news articles.
What about the consumers? Rubis and other Dominican dealers want to make profit by selling diesel and gasoline alone, such an operation can only be profitable if it is a family or one man operation. In the Caribbean and other parts of the world almost all gas stations have a convenient stores attached because the operators are aware that the profit margin on gas and diesel are slim. They have the same issue in the USA, but then again the gas station is part of a convenient store. If Rubis has to get what it wants the price of fuel has to be increased and the consumer suffers. So if Rubis is not profitable it should just leave or change it’s business strategy.
Point: “If Rubis has to get what it wants the price of fuel has to be increased and the consumer suffers.” And this is the crux of the matter that no one speaking out in support of Rubis is saying to Dominicans’ not even Tony, himself, is honest enough to say so…forever blinded by his warped political prisms.
You did not read to understand, Point. You are mixing the retail side of the industry with the distribution side. Retailers are under tremendous pressure as well. They more than deserve an adjustment to the retail margins regardless of what you seem to believe. Without the retailers where will you get fuel for your Mercedes? Everyone deserves a fair return on their investment.