Retailers on St. Croix increased the price of regular grade gasoline an average of 30 cents per gallon last week, according to the Department of Licensing and Consumer Affairs, a spike that far outpaces recent changes in wholesale prices from the Hovensa rack that supplies the island.
Prices for regular grade gasoline on St. Croix averaged about $4.29 per gallon over the past week. The notable increase came in the wake of several weeks of gas prices on St. Croix remaining generally unchanged – pennies short of $4 per gallon of gasoline.
“From Dec. 29, 2013, through March 3, 2014, Hovensa’s wholesale rack price for regular gasoline has increased by 35 cents per gallon from $2.95 to $3.30," DLCA Commissioner Wayne Biggs said in a statement Monday. "During this period, the average price for regular gasoline at the pump on St. Croix remained at $3.97 – a price that reflects delivery charges and gasoline taxes,” Biggs said.
“While it is not unusual for retailers to pass wholesale price increases onto their customers, it is out of the ordinary for the gasoline retailers to bear the increases without immediately increasing fuel prices at the pump," he said.
In essence, Biggs said, the retailers had been absorbing the increases in wholesale prices at the Hovensa fuel truck rack without passing them on to their customers and Biggs pointed to Hovensa as the ultimate cause.
He noted Hovensa uses world market industry conditions and the volatile oil market to justify its rack rate increases. “In the past, we have requested their method for determining their prices, but they always indicated that the information and methodology is propriety and have not shared it with the DLCA,” Biggs said, adding that the department doesn’t really know how Hovensa determines the rack rates.
“We are reviewing whether we can require Hovensa, which is no longer operating as a refinery but instead only as a wholesaler, to show proof of a new delivery of fuel before increasing the rack rate,” Biggs said.
Biggs said the DLCA requires gasoline retailers who want to raise their prices to submit a written request to the department with the price change indicated and provide documentation evidencing they have received a delivery of new fuel inventory before approval is granted to increase their price. However, DLCA does not control or set the price charged by the fuel retailer.
“Although last week’s increase on St. Croix was a significant price hike at the pump, it was not unexpected that the retail gasoline prices would increase to catch up with the wholesale increases. The retail prices had stayed basically flat for about 12 weeks while, at the same time, the wholesale price was steadily increasing at the Hovensa fuel rack,’’ Biggs added.
He said fuel retailers began requesting the increases a couple weeks ago when the rack rate for regular gasoline increased by 7 cents but they did not implement the price increase at the pump until last week.
As of March 10, the Hovensa rack rate was $3.29 per gallon of regular and $3.67 per gallon of premium grade gasoline, well below the all-time high for Hovensa’s rack rate: $3.68 per gallon of regular and $3.97 for premium, which was set the week of April 9-15, 2012. Those prices do not include V.I. fuel tax, which was 7 cents per gallon in 2012, but is now 14 cents per gallon.