DLCA Commissioner Rutnik Decries Gas Price Gouging


Gasoline and diesel prices have garnered much attention both locally and nationally over the last couple of months. It is all a result of the mercurial rise of crude oil in the last two years, and most recently the over $70 a barrel prices in the world market. This has produced sticker shock at the pump for consumers both here and nationally. The industry itself has been under increased scrutiny and much of the debate has centered on the increased cost of fuel to consumers and the astronomical profits of such industry giants as EXXON Mobil and Chevron Texaco. Both of these giants have subsidiaries in the Virgin Islands.

What is distinctly different between the plight of Virgin Islanders consumers and our stateside counterparts is that we have the lowest tax under the American flag. Where states may vary in federal and local taxes by region, the average tax in the United States is well over 56 cents per gallon, while ours is only 7 cents per gallon.

Defenders of the price of gas in St. Thomas often say that the price is the same as the states which is deceiving and inaccurate. For instance, the current price of regular gas in Albany, New York is about $3.07 per gallon, less the tax, 52 cents, which makes the true price of the gas $2.55 per gallon.

The price of regular gas in St Thomas averages about $3.23 cents per gallon, the tax is 7 cents, the true price being $3.16 per gallon. The difference between the price of Hovensa gas sold in Albany, New York and what is sold in St. Thomas is a whopping 68 cents per gallon.

To me there is no justification for this disparity, and I consider it price gouging. Who is the culprit? Supplier? Wholesaler? Retailer?

Our investigation of this price disparity back in 2005 revealed that Hovensa sells fuel to ESSO Virgin Islands and Texaco Caribbean at a negotiated contract price. Texaco and Esso then sell to its St .Thomas retailers at a negotiated price. The retailers are then forced to sell it to consumers at prices determined by what the market can bear, generally with small profit margins. So where is the smoking gun?

Just look at the profits of EXXON Mobil or Chevron Texaco, over $20 billion dollars in the first quarter of 2006 alone, and this is after EXXON Mobil showed in 2005 the highest profits of any corporation in the history of all industries. I don’t see the local retailers recording profits of this nature, on the contrary, they are all feeling the brunt of the consumer as he or she fills their tank for $60 dollars plus.

To fully understand how the fuel industry works and sets its prices is too complicated and detailed for this article; however, let it suffice to say that consumers have no say, no sway, other than to pay.

Recent calls from Congress to reduce the taxes to ease the pain on consumers pocketbooks should take a lesson from the Virgin Island Legislature that over rode a veto by the Governor of the Bill to reduce our tax by 7 cents. Did the consumers ever see that translate into lower prices? Or did it just enrich an already fat profit margin for our St. Thomas wholesalers, and was then passed on up the chain to contribute to the record profits of the mother ship.

Congress has also called for increased taxes on fuel to discourage consumption, another bad idea. Who pays these increased taxes: consumers? It is the constitutional right of a supplier of fuel to pass on any and all taxes imposed by government, and I am sure they exercise that right.

When will we as Virgin Islanders learn that our power is in demanding what we know is right, not just what experts or our leaders tell us is right. We should have long ago demanded laws and tools that enable us to protect ourselves against those that profit obscenely at the expense of our more pressing needs. Our future is in the hands of so few, are destiny awaits action, and time is not on our side.

Commissioner Andrew Rutnik
Dept. Licensing & Consumer Affairs