Cheaper gas does noT improve sales

Drop in the price of gas not enough to increase sales AT THE PUMP

Retailers say spiraling inflation is to blame

Efraín Montalbán Ríos, The Weekly Journal

Despite the stabilization of the price of the oil barrel and the temporary repealing of “la crudita” (the fuel tax), an increase in gas consumption in Puerto Rico is not anticipated due to the inflationary effect, according to the president of the Gas Retailers Association (ADG, for its Spanish acronym), Esdras Vélez.

According to Vélez, the gasoline market is in a state of “self-regulation,” in terms of the international price of oil, so it is estimated the price of crude oil will drop to about $70 by the end of the year. However, although this is good news for the consumer, Vélez anticipated there will be no increase in consumption until the inflation rate drops.

“There has been a decrease in the sale of fuel at the stations and, taking into consideration that [the price of] everything is increasing, it will influence [fuel] consumption. Everything has increased in this economy and there is less money available to buy products. For me, this is going to continue. For the sale of fuel to increase, there must be a decrease in inflation”, emphasized the ADG president.

For economist Leslie Adames, the decrease in the price of fuel continues to be insufficient to promote a rise in consumption.

“With the increase in prices in this economy – without salary increases that could compensate for the loss in purchasing power due to inflation– the consumer finds himself in a position of a fixed salary to cover his needs,” Adames said.

According to the economist, the growth of annual gasoline consumption has reflected a slowdown since June 2021, when it increased 25%. Since then, sales have decrease until last May, when it reached 2.9%.

“We came from a peak growth of 25% per year in June 2021, to an increase in gasoline consumption of 2.9% per year for May 2022. Growth has been slowing down,” said Adames.

Meanwhile, the president of the Gas Stations Committee of the United Retailers Center (CUD), Carlos Crespo, argued the decrease in consumption is not new to the island. Up until a few years ago, more than a billion gallons of gas were being sold but, after the Covid-19 pandemic, estimates put that figure at 800 million gallons. “We have seen –since the pandemic began– that gasoline consumption has decreased dramatically, but when the price of gasoline began to rise in December, and after the war between Russia and Ukraine –when the price shot up almost 50% – people continue to spend the same amount of money, but they receive less gasoline,” said Crespo. Héctor Román Maldonado, director of the Economic

In fact, Studies Division of the Department of Consumer Affairs (DACO, for its Spanish acronym), reported that the The average Puerto agency does not have updated Rican can now statistics on consumption buy 1,260 liters of patterns at gas stations on the gasoline with the island. An order has been issued average salary, for retailers to document this which are 1,004 liters information daily. less than a year ago. A report from Picodi.com, a firm specializing in studies based on consumption, confirmed the decline in gas consumption on the island. The study shows that the average Puerto Rican can now buy 1,260 liters of gasoline with the average salary, which are 1,004 liters less than a year ago. The study also showed that the price of fuel in Puerto Rico ranks eighth among the 21 countries included in the investigation, with an increase of 48.7% higher than the cost of January, which Vélez attributed to fuel taxes and the increase in the

DACO inspectors visit a gas station in San Juan. >FILE: Brandon Cruz González / EL VOCERO

The only way to pay less, when compared to other countries, has to do with taxes and importers. That’s the combination…

Esdras Vélez, president of the Gas Retailers Association

transportation of fuel to the island.

“The only way to pay less, when compared to other countries, has to do with taxes and importers. That’s the combination… we receive that bill and we pass it on [to the consumers]”, indicated the retailer.

In the meantime, Román Maldonado assured that the increase in the price per liter of gas has remained below international increases because profit margins have been imposed on the retailers and because of the repealing of “la crudita.”

“We are looking at two things here: a freezing order [on profit margin] and “la crudita”. Since the freezing order is in place, if the international market [price] drops, it will be reflected in Puerto Rico. In the same way, the 16 cents per gallon from “la crudita” will also be reflected,” the Secretary explained.

Román Maldonado calculated the average price of gas on the island —from January to June 2022— and it showed a 51.92% increase for regular, and a 49.41% for premium. The greatest increase was diesel fuel, with a 75.3% increment.