What ‘Drives’ the Price of Gas in Cayman

By Stuart Wilson

Much of the debate in the Cayman Islands around gas prices centres on Middle Eastern tensions and the war in Iran. However, some argue that this should not be a determining factor locally since the Islands do not get their fuel from that region.

Former Ofreg officer Dwayne Ebanks, who was the only Fuels Inspector serving all 3 Islands from June 2013 to May 2023, noted that since gas is purchased in America, prices here should not be subject to the uncertainty of war in Iran. He feels that the authorities in the Cayman Islands should not be overly focused on the situation in the Middle East, as has been posited in the press by some public officials.

“OfReg CEO claims that the OfReg office, namely OfReg Fuels Sector, is monitoring the current Middle East situation,” he noted, adding that, “This is not necessary since the fuel that comes to the Cayman Islands is more closely linked to America.,”

However, in an exclusive discussion with the Caymanian Times, Rubis gas station operator, Prentice Panton, explained that the situation was not as basic as that assertion might imply. He said a more pragmatic view can be found in the cascade of chain reactions that world events have, not just on the supply but also on suppliers.

“The blockade in that region (the Middle East) has meant that the US are the only suppliers left for most other parts of the world in most cases, and as a simple matter of economics, when demand increases, so does price,” noted Mr. Panton,

He added that the owners of retail fuel stations in the Cayman Islands do not set the prices at the pump, but are subject to the rates imposed by the parent company’s Rubis and Sol, respectively.

“The gas business is much different than any other business I have been in because unlike other businesses, if your prices don’t go up immediately when prices rise globally, it is much more expensive to repurchase and the margins make it even more difficult. On top of that, there is only a certain amount you can raise your price to after repurchasing to make up for any shortfall experienced when repurchasing,” explained Mr. Panton.

Issues ‘fuelling’ the local debate

Dwayne Ebanks said, as the regulator, Ofreg should know what the cost to purchase fuel and ship it is for the parent companies and publish those numbers. He said this would better inform the buying public about the true picture of what is actually moving the price of gas so high in Cayman (just under CI$7) in some instances.

 “The government needs to implement some price controls via consumer protection legislation so that the regulator can have more authority in relation to what is charged for gas,” Mr Ebanks suggested.

He said publishing all the numbers regarding costs and general mark-up would be essential for legislation that is based on transparency.

Though Mr Ebanks’ assertion that gas prices in Cayman should not be as high in contrast to prices in the United States, Mr Panton explained that there is shipping to consider, which adds to the disparity.

He said that he had just returned from Miami, where he had US$ 6.39 at the pump. According to the Rubis gas station operator, gas retailers in Cayman get a price list with two to three days lead time, and he concurred that retailers in the Islands’ industry are not privy to what the parent company is paying for the gas or what their mark-ups are.

“Ofreg would have that information,” he agreed.

Bank fees for transactions also hurt gas retailers, and bank fees on higher sales eat into profits.

The conundrum gas station owners face, according to Mr. Panton, is that the more gas that is sold, the more of the already tight profit margins goes to bank fees.

 “X percentage of a smaller amount is less than ‘X percentage’ of a greater amount,” he noted.

On the other end of the spectrum, Mr Panton said higher prices usually mean people become more conscious about driving and drive less, so there is less business. 

“The price of gas and the perception of the public affects a lot of areas people don’t think about and you also get a lot more cases of people driving off without paying when gas prices rise.” 

Other perspectives suggest that legislation may be the only relief for consumers of gasoline products in the Cayman Islands, but even that is a complex issue which will involve several entities and industries.

As gas prices continue to soar to some of the highest prices ever in the Cayman Islands, the government has been exploring ways to cushion the burden on consumers by discontinuing duty on gas, diesel, and propane.

The CI$ 9 million package, which is essentially an emergency measure, will run for four months (June to September) and will also introduce a CI$ 0.18 cap per kilowatt hour on CUC and Island Energy charges.