August 31, 2006

The Kaselehlie Press

If Senator Feliciano M. Perman's proposed bill (307-05), the "Petroleum Prices Disclosure Act of 2005" passes through the legislature and becomes law, all retail sellers of fuel on the island will have to post two prices at their fueling stations. They would, according to the bill, have to post the sales price and also prominently post the cost they paid for the fuel they are selling.

Section 1 of the bill, findings and intent says, "The Legislature finds that Pohnpeian consumers are being injured by unreasonably high prices for petroleum products. It is the purpose of this act to ensure that consumers receive full disclosure as to prices being paid for petroleum products, and also to make it more difficult for gasoline retailers to enter into illegal anti-competitive price-fixing agreements."

A hearing was held on Wednesday, August 23rd to allow targeted retailers to express their views on the proposed bill. Akilino Susaia of Amcres was one of the retailers present at the meeting. "I agree with the premise. The high price of fuel is hurting everybody, even me. People think I get my gas for free..." Frank Panuelo of Panuelo Gas asked, "how is this [bill] going to 'cure the injuries'...talk to OPEC or Mobil."

Susaia said, one of the "sticky points is the confidentiality agreement we had to sign [with Mobil]." Of the three station owners interviewed, each one indicated that this factor would be a problem. Mobil Oil Micronesia, Inc. (MOMI) apparently required each station owner to sign a confidentiality agreement on the terms of their negotiated purchase price of fuel.

Panuelo asked the question, "If I break the confidentiality agreement [in order to comply with the law] Mobil will sue me. Who will I sue? The Legislature…" He agreed that the price of litigation might eventually have the effect of driving fuel prices up.

The confidentiality agreements hamper more than just the proposed bill. A bill passed into law in 1973 (3L 72-73) established a Price Control Commission for the State of Pohnpei. The law also established a maximum percentage rate markup for each sale of any product imported into Pohnpei. An importer is allowed to mark up prices by a maximum of 50%, while the retailer who buys from the importer is allowed a maximum markup of 20%. Even if the Price Control Commission was active, which it has not been for some time now according to Legislative Counsel, the confidentiality agreements with Mobil would make enforcement of that law difficult if not impossible. A question exists as to whether or not retail fueling stations were, under that law, ever legally allowed to sign confidentiality agreements with MOMI.

All of the interviewed station owners asked why they were being singled out as the cause of the high price of fuel in Pohnpei. In an interview in his office Perman said that he had intended that the legislation would also cover MOMI but a letter from Kamal Singh, President of MOMI said that since "it does not set retail prices charged at those [service station] sites…it is inappropriate for MOMI to comment on [the] bill…". Perman indicated that the proposed legislation might need to be modified in the Resources and Development Committee of which he is acting chair to include MOMI within its purview.

Yosuo Phillip of P.I.T.C. said that he was charging no more than 8% markup on the fuel sold at his station. Mihpel of Amcres said that their station charges between 7% and 8% markup on fuel purchased from Mobil Oil. Panuelo said, "we're well below what we're allowed to charge. We're not the problem."

Senator Perman said when asked about the reportedly small markup rates, "That's just not true and anyway how would we know with the confidentiality agreements?"

He commented on Yoshie's practice of listing two prices for many of their items as an example of why the bill should not be a problem for gasoline vendors. The management of Yoshie's said that one price was a per piece price and the other was a bulk "case" price but that they do not display their cost on items.

All the vendors interviewed said that if a Price Control Commission were to be reestablished they would be able to stand against the scrutiny but that a public posting of their markup amount would detrimental to the competition that currently exists.