Sept. 24, 2004 Licensing and Consumer Affairs Commissioner Andrew Rutnik released Friday the results of a $60,000 fuel-price study his department had been working on for several months.
Despite the fact that the territory has the lowest amount of tax per gallon of fuel in the entire world, Rutnik said, Virgin Islanders still pay the highest price per gallon of gasoline in the world when the tax is removed. Gasoline consumers in the territory are spending on average $1.96 per gallon before the tax is added.
"This amounts to 20 cents more than anywhere else in the world," Rutnik said, adding that this is an average of all three islands, not taking into account St. Croix's special rack rate price. The rack rate price refers to the price charged to St. Croix retailers by Hovensa to transport the fuel to them.
"With the presence of Hovensa on the island of St. Croix and the close proximity of St. Thomas/St. John to this refinery, Virgin Islanders should be benefiting handsomely in lower fuel costs," Rutnik said during a press conference at his office.
Rutnik said the disparity in fuel price between the St. Croix district and the St. Thomas/St. John district stems from the fact that St. Croix has no middleman. Retailers on St. Croix purchase fuel directly from Hovensa.
In the St. Thomas/St. John district, a middleman is involved. Two wholesalers –Esso and Texaco — purchase fuel from Hovensa and then retail it to consumers. Domino, which is considered a retailer, purchases its fuel from Puerto Rico.
Because of freight costs to transport the fuel to St. Thomas and St. John, consumers there pay a higher price.
"These additional expenses explain some of the price difference between the islands, but not the 45 to 75 cents difference that presently exists," Rutnik said, adding that when the study began, the price difference between the two districts had been on average 75 cents to $1.
Rutnik had placed a price freeze on gasoline at the pumps April 1, but allowed for an increase to St. Croix retailers because Hovensa had raised its rack rate price. (See "DLCA Lets St. Croix Gas Stations Hike Pump Prices" ).
Because of the increase, the disparity between the two districts lessened.
Consumers, however, may see an increase in their gas prices at the pump Oct. 1, when Rutnik implements a flexible petroleum tax on the wholesalers in the St. Thomas/St. John district and the retailers in St. Croix. (See "New Fuel Tax In Effect But Not Being Collected").
Rutnik said the price freeze given to the retailers would no longer be in effect on Oct. 1, but he will be implementing new regulations. He did not specify the regulations, stating that he had to discuss them with Hovensa and the retailers first.
Rutnik gave four recommendations, which he said would benefit consumers and the industry on a whole.
The first recommendation is to set up a regulatory framework that will set prices at the wholesale level for a two-year period.
"A reasonable profit is a right of every business, however, consumers need to be protected when an almost monopolistic market exists," Rutnik said.
The second recommendation is to encourage more competition, both in the St. Croix and the St. Thomas/St. John districts. Rutnik said an "unlevel playing field" also exists in St. Croix because some stations are not paying their fair share of taxes and government fees.
"This creates an unfair advantage against those whom they have to compete with on price," Rutnik said.
In the St. Thomas/St. John district little competition can be found on price other than full-serve verses self-serve stations, Rutnik said. He added that Hovensa is willing to sell to any qualified St. Thomas independent fuel supplier or retailer at its rack rate price.
"The entry of independents in the St. Thomas/St. John market, possibly as a cooperative of independents, could bring some real competition to this market," Rutnik said.
The third recommendation is educating the consumers on how to purchase fuel wisely and save on energy costs by maintaining their vehicles.
"Our estimates show that consumers could save over a million dollars a year by using regular gas when recommended by the manufacturers, using self service and having your cars serviced regularly," Rutnik said.
The study revealed that 75 percent of St. Thomians use premium gas as opposed to regular, whereas 75 percent of Crucians use regular as opposed to premium.
"St. Thomians believe that premium gas is better for your cars and engine and continues to be a major factor in the St. Thomas market," Rutnik said. "This is despite the fact that most car manufacturers recommend regular for their vehicles. This is a costly decision on the part of St. Thomians and costs hundreds of thousands of dollars in additional fuel costs."
Rutnik's final recommendation for the territory is to develop an improved marine industry, providing fuel for yachts and even cruise ships.
Sen. Shawn-Michael Malone, the only senator at the press conference, said he attended because the legislature had appropriated the money for the study and he wanted to know the results.
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