April 20, 2005 – Licensing and Consumer Affairs Commissioner Andrew Rutnik Wednesday placed the blame of rising fuel prices on the shoulders of Hovensa and gasoline wholesalers in the territory.
During a hearing of the Senate Government Operations and Consumer Protection hearing, Rutnik said gasoline prices in the territory were too high, especially since the Virgin Islands is home to one of the largest refineries in the Western Hemisphere.
"The cost of living is going through the roof," Committee Chairman Sen. Adlah "Foncie" Donastorg said. "People in this community are on fixed incomes and they cannot deal with the rising cost of gas and the average cost of living in the Virgin Islands."
Rutnik said he does not have a problem with retailers in the St. Croix district. But wholesalers in the St. Thomas-St. John District were driving up their prices. Rutnik said while the average price for regular gasoline was $2.25 for Hess stations on the mainland, the average price for gasoline in the St. Thomas-St. John District was $2.72.
This should not be, Rutnik said, because the mainland Hess stations and the wholesalers in St. Thomas-St. John both purchase fuel from Hovensa. If anything gas prices should be cheaper in the territory, Rutnik said.
Rutnik also said that Hovensa is not giving St. Croix a break on gas prices like it used to in prior years.
"Are you putting the blame squarely on Hovensa?" Sen. Ronald E. Russell asked Rutnik.
Rutnik replied, "Yes, on St. Croix. No, on St. Thomas."
Sen. Terrance "Positive" Nelson told Rutnik that the only thing resulting from the DLCA's study on the disparity between gas prices in the territory's two districts is that the price of gasoline on St. Croix has been brought closer to that on St. Thomas.
"We should be the envy of this region for gas prices," Nelson said.
Rutnik said his agency's fight against the gasoline wholesalers is a "three-round battle." In round one, the DLCA won when it instituted the cap on profit margin to the gas wholesalers and retailers. Gas prices had been reduced, Rutnik said.
In round two, the wholesalers – Esso Virgin Islands Inc. and Texaco Caribbean Inc. – won, after the DLCA removed its cap on gas profits. This led to the recent hike in gas prices. (See "Consumer Department Removes Cap on Gas Profits").
Rutnik said in round three, he is hopeful that District Court Judge Curtis Gomez would rule that the DLCA has the authority to regulate the gasoline companies. Gomez will render his decision on the matter Friday.
"If we can win round three, prices will lower again," Rutnik said. "Prices at this point need to be controlled."
However, Rutnik said the DLCA would not be able to regulate Hovensa.
"Hovensa has a contract agreement with this government that takes precedent over any regulations," Rutnik said, although he admitted he had never seen the contract. Rutnik said Hovensa officials threatened, if he tried to place any regulations on the company, it would not retail their product in the Virgin Islands anymore.
Sen. Ronald E. Russell said the government "can't be held hostage" by Hovensa.
"That's not a balanced playing field," Russell said. He added he would be introducing legislation against anti-trust monopolies.
Russell said, "As a small territory, we're subject to the abuses of monopolies. We've got to protect against that."
Sen. Louis P. Hill said he hopes the DLCA's attorneys have the expertise needed in the fight against the wholesalers.
"We must be prepared to fight the fight that they're prepared to fight," Hill said. "We have to be able to control the prices of fuel in this territory."
Hill asked whether the V.I. government was working on a contract agreement with another gasoline company since Esso ended its discount with it last month. (See "Biggs Says Esso Out to Get Government ").
Rutnik said negotiations were taking place for another gasoline vendor. However, the government has to pay the retail price at the pump for its fleet in the meanwhile.
"The Police Department is bleeding to death because of the cost of fuel," Rutnik said.
Donastorg said it was time the government purchased storage tanks to store fuel for its fleet. He cited old and new legislative efforts to that effect.
Committee members present at the hearing were: Sens. Donastorg, Juan Figueroa-Serville, Hill, Shawn-Michael Malone, Nelson, and Russell. Sen. Liston Davis was absent. Sen. Usie Richards, who is a not a member of the committee, was also present.
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