ST. CROIX — Fuel retailers will have to provide rack rate purchase invoices among other documents to the Virgin Islands Department of Licensing and Consumer Affairs as the regulatory agency strengthens enforcement of prices at the pump, according to DLCA.
The department noted its plan to implement mandatory reporting follows ongoing concerns over persistently high fuel prices in the territory, despite a significant global decline in oil prices and rack rates.
Senator Hubert Frederick demanded accountability for high fuel prices in the territory in a statement issued Wednesday, formally requesting DLCA review pricing practices by fuel importers and distributors.
In addition to the reporting requirements, DLCA’s effort to crack down includes conducting audits and investigations into pricing practices and using subpoena authority to secure rack rate and pricing documentation. It is all to promote fairness and address an imbalance as DLCA pointed out that fuel retailers have been observed to often raise prices when rack rates increase but seldom adjust them downward when costs fall.
“The people of the Virgin Islands deserve transparency and fairness at the pump,” Licensing and Consumer Affairs Commissioner Nathalie Hodge stated. “I urge all fuel retailers to reassess their current prices, account for recent declines in costs, and make the necessary adjustments. If savings are being realized at the rack, they must be passed on to the public. Our department will use every tool available to ensure accountability and to protect the interests of Virgin Islands residents.”
In addition to requiring rack rate purchase invoices, the reporting requirements include shipping and logistics costs, inventory turnover data, operational overhead, and markup formulas and pricing models.
Frederick, in his statement, called for greater transparency and accountability in fuel pricing in the Virgin Islands as gas prices remain “stubbornly high” despite the global drop.
“If the cost of fuel is dropping worldwide, our people deserve to see that reflected in local retail fuel prices,” Frederick stated. “We must ensure that any cost savings are passed along to consumers and not absorbed solely by middlemen or fuel companies.”
Frederick, while discussing his request that DLCA review fuel pricing practices, stressed the need to find out why there has been no adjustment of gas prices in the territory.
“This is a commodity that fluctuates, and so the prices should reflect the fluctuation in the market rates,” he said. “So, we need to do more in making sure that we safeguard the consumers and make sure that during periods like this, where prices are all heading downwards in terms of the barrel cost for oil and also the rack rates being lowered, that the consumer receives some relief.”
When fuel retailers keep their prices the same even though their costs go down, the senator pointed out that their profit margins increase.
“I don’t know why market pressures don’t cause these gas stations to compete,” Frederick said. “They really should be competing and want to make sure they provide their customers with the best value. But that doesn’t seem to be occurring here.”
DLCA’s fuel survey during the week of April 20 found the average price for regular fuel was $3.99 per gallon on St. Croix, and $4.79 per gallon on St. Thomas and St. John. While the prices fluctuated between $4.69 to $5.29 at 23 gas stations on St. Thomas, the price at 29 gas stations on St. Croix was either $3.98 or $3.99, except for one gas station at $3.94.
Frederick discussed the lack of competitive pricing, suggesting a need to investigate the matter to find out why gas prices on St. Croix are stubbornly stuck at $3.99 per gallon.
“You don’t want to suggest that there’s any collusionary practices being had, but it makes you wonder why is it that no one wants to take a leap and say, ‘listen, I’m going to charge a fair price and start the trend so that the consumer could save some money when there’s, in fact, a reduction in fuel prices worldwide,’” he said. “That’s something I really would like to dig into and find out what DLCA is coming up with because this makes no mathematical sense. The market pressures should be working here in the Virgin Islands so that the consumers aren’t taken advantage of.”
While Brent crude oil prices dropped by 19% to $61.12 per barrel as of May, DLCA noted local prices have not reflected this decline as the rack rates at Sol Petroleum’s Limetree Bay Terminal on St. Croix saw only modest decreases. Despite a 2.8% reduction in regular gasoline at the rack to $2.46 per gallon from $2.53 per gallon, a 2.2% reduction in premium gasoline to $2.67 per gallon from $2.73 per gallon, and a 5.2% reduction in diesel to $2.73 from $2.88, DLCA’s analysis revealed notably high gross margins between rack rates and retail prices on St. Croix. There is a variance of 62% between the cost of regular gas at the rack for $2.46 per gallon versus at the pump for $3.99 per gallon. While premium gas is $2.67 per gallon at the rack, the retail price of $4.40 represents a 65% markup. Diesel is $2.73 per gallon at the rack, but there is a 70% retail markup to $4.63 per gallon. U.S. fuel retailers typically see gross markups of just 10% to 12%, or 27 cents to 40 cents per gallon.
On St. Thomas and St. John, DLCA indicated that retail prices are even higher, with diesel costing as much as $5.89 per gallon. By contrast, Gulf Coast wholesale gasoline prices fell more sharply to about $2.04 per gallon. The Gulf Coast refining region is one of the largest oil refining hubs in the world. Nationally, the Producer Price Index for gasoline dropped 11.1% in March and retail prices fell 13.3% year over year, according to DLCA.
Frederick noted he is considering legislation requiring greater public disclosure of fuel pricing data. The measure would also ensure price adjustments are tied more closely to changes in wholesale costs.
“This is about fairness and economic justice,” the senator stated. “In a time when every dollar counts, our people deserve honest pricing — not unexplained markups.”
DLCA strongly encourages retailers to pass on savings in good faith. Consumers are urged to report concerns by calling 340-713-3522 or 340-714-3522, emailing myrna.george@dlca.vi.gov, or visiting www.dlca.vi.gov.
