Albert Brandford’s excellent article in last Thursday’s Nation (January 23, 2014, Page 18) on SOL’s purchase of Esso service stations in Barbados, titled Fewer Players Fuel Concern, highlights the present state of the virtual monopoly that has emerged in our traditional gas stations.
The article summarised the findings of the Fair Trading Commission’s (FTC) report last October approving the purchase of Exxon Mobil’s assets by Simpson Oil Ltd, which as we all know is headed by one of the region’s most outstanding entrepreneurs, Barbados’ own Sir Kyffin Simpson.
The FTC’s analysis of the market showed that while SOL, which purchased the Shell business here many years ago and is gradually rebranding it, had a total of 19 service stations pre-merger compared with Esso’s nine, both entities were neck-and-neck in actual gasoline/diesel sales volumes.
Both SOL/Shell and Esso enjoyed market shares by volume of 30 to 40 per cent for the period June 2012 to August 2013, said the FTC.
Recent market entrant Rubis, which purchased Texaco’s 12 service stations here a few years ago, had a volume market share of 20 to 30 per cent.
By the way, I have no idea why we cannot be told exactly what these percentages are. Is it the FTC’s decision to give us these ten per cent-wide bands just to whet our appetite? Seriously, FTC, get with it. We need data out here.
The FTC conclusion that with Shell/SOL and Esso competing closely for top spot and Rubis not far behind, in terms of volumes sold, there was a “high degree of competition among the major players in the retail market”.
This notwithstanding the fact that SOL now owns all of the Esso stations, and thus has two-thirds of the sales by volume of gasoline/diesel combined, with the other one third held by Rubis and three remaining independently owned stations.
This leads me to assume, although I have not heard it officially, that SOL will be allowed to keep operating the Esso stations under their present branding, at least for the time being, as they have done with Shell.
The FTC hinted at this by stating that, because of the conditions of the merger, “it is not envisioned that consumers would be limited in choice of branded fuel”.
Really? You go into a SOL, Shell or Esso station today and you are buying fuel from Sir Kyffin. No problem, says the FTC, because “although it may be intuitive to equate high concentration levels with reduced competition as a result of fewer competitors” (you think?), “it may not automatically apply in this instance as behavioural issues are of more significance”.
What really influences a service station’s sales, it said, were ease of getting in and out of it, and location, location, location.
The FTC also believes that because the prices of gasoline and diesel are set by Government, the guy with the bigger market share won’t be able to use his economies of scale to undercut the other, smaller guy and try to put him out of business.
Whatever the arguments used by the FTC to justify Sir Kyffin’s mega-move into the fossil fuel business here in Barbados – mirrored elsewhere in the region, as these acquisitions are not limited to Barbados only – the fact is, the big players want to move their capital to emerging markets where there is less regulation and lots more money to be made from fossil fuel sales. That was why Shell got out of here, and I would not be surprised if it is the same for Exxon Mobil.
I suppose we are lucky to have a son of the soil with the money to compete for the business; otherwise we might just end up with Rubis and Total, or Hess, owning all of the stations.
But apart from the ludicrous suggestion that there will still be choice in the marketplace because Sir Kyffin will keep up the pretence that Esso stations are somehow different from SOL/Shell stations (maybe one will offer lattés and bagels while the other will not), I see another conflict of interest facing Sir Kyffin, which I asked him about a couple of years ago at a public forum.
I wondered if he was thinking about investing in alternative energy. You know, becoming part of the solution to carbon emissions polluting our world and causing global warming, and not just being the guy who buys up the assets of the retreating fossil fuel marketing companies as they set out to find, ah, greener pastures to pollute.
Sir Kyffin’s response was that he was looking at natural gas shipments to the region to replace the heavier oil-based fuels being used by the electricity companies. Not a word of interest in photovoltaic or wind energy.
If you go up to the second floor of the new Williams building at Warrens, you will see rooftops covered will solar panels right next to Simpson Motors Ltd. All of them, I understand, are owned by Bizzy Williams’ companies. My question: Does Simpson Motors have anything on its roof to harness energy from anywhere other than old dinosaur bones?
The conflict, as I see it, can be phrased in another question: Does Simpson Motors have anything on offer now, or will it in the near future, by way of vehicles which seriously use less fossil fuel, even if they replace the gasoline or diesel with electricity for part of the ride?
• by Pat Hoyos, long-standing journalist and publisher of the?Broad Street Journal.
