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Fuel Freeze Extended, But Pump Price Trend Is Down

July 1, 2004 – Licensing and Consumer Affairs Commissioner Andrew Rutnik on Thursday extended for another month the freeze on motor fuel prices that first took effect on April 1.
That doesn't mean that prices cannot increase through the end of July; it does mean that wholesalers, retailers and marine fueling stations must continue to get permission in writing from DLCA before they raise them. And in order to obtain that permission, they must submit the proposed increase, the most recent date of fuel delivery and an invoice documenting an increase in their costs.
However, that may not happen. In recent weeks there has been a turnaround nationwide in the steady escalation of prices earlier this year, and a release from Rutnik's office said he was glad to see Texaco Caribbean and Hovensa lower their gasoline and diesel fuel prices "to reflect the national trend."
The release also stated: "Although Esso and Domino have not notified DLCA of any price reductions at either the wholesale or retail level, we encourage them to be sensitive to their consumers and pass on their reductions."
In the release, Rutnik also said the gasoline fuel cost study undertaking by his department last spring "has been completed and is in draft form." He said that "preliminary information has indicated that there is the potential for more competitive pricing of fuel in both the St. Thomas/St. John and St. Croix markets."
Rutnik instituted the price freeze initially for 30 days, saying in April that he had taken the action "because of the need to control the prices of fuel in the territory during the implementation of the flexible petroleum tax.."
The tax became law on March 23, but Rutnik said in April that no effort had been made to begin collecting it because of the failure of some companies to return questionnaires from DLCA aimed at determining why gasoline in the territory sold for anywhere from 38 cents more to 39 cents less a gallon than the national average. (See "Gas Prices Frozen as New Tax Being Implemented".)
The flexible fuel tax is aimed at lessening the impact on consumers by fluctuating with changes in gas prices, Rutnik has said. As prices rise, the tax rate will decline; when prices drop, the tax rate will go up. This contrasts with the flat tax of 14 cents a gallon at the pump in effect since the early 1980s. But because of the number of exemptions from that tax, Rutnik said in March, his figures indicated that "we're only getting about 30 percent of the fuel consumed in the Virgin Islands taxed."
The effect of the price freeze over April and May was a lessening in the rate of increase locally on St. Thomas and St. John compared to the U.S. mainland, so that the spread between stateside and local prices had become the least in memory. At the same time, DLCA granted significant pump price hikes on St. Croix due to increases instituted by Hovensa reflecting the world market cost of crude.
In June, DLCA asked local wholesalers and retailers "to copy the price reductions in both the United States and Puerto Rico that were reflecting a drop in crude oil prices," Thursday's release stated. The price of crude peaked on June 1, it said, and since then "there has been a 17 percent decrease," with further declines expected.
Licensing and Consumer Affairs will continue to monitor fuel prices locally with the option of mandating reductions to reflect lower costs "until we are satisfied that consumers are getting the benefit of a true free-market economy," Rutnik said. "DLCA respects the right of any business to make a profit, but we must also ensure that consumers are protected from the fuel monopoly that exists in the Virgin Islands."
Fuel dealers can fax requests for price increases and the required documentation to the department, a release stated, "and once such increases are approved, permission will be granted without delay." Any increase above the amount authorized will result in a fine of $200 per day per violation, it said.
No permission is needed to reduce prices, it said.
For more information, call Alli Paul, DLCA director of consumer services, at 773-2226 on St. Croix or the commissioner's office at 774-3130 on St. Thomas.

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