Trying to understand the DR economy, Recap, Regurge, Rehash . . .

The price of gas is established on a weekly (normally) basis by the Secretary of Industry and Commerce, and typically is changed late on Friday nights at the pumps.

The government sets the gas prices so that station owners realize a 10.5% gross profit on gasoline and diesel sales. Lower your price, and risk getting shot at by other station owners, or getting arrested by the government.

While this sounds bad to someone from the US, consider this - that as small as this country's gas market is, it would be very easy for someone with serious $$ to gain a monopoly by controlling most of the stations in the DR and take control of the market, charging what they wanted to, (far above the market equilibrium price) and effectively shutting down the country (gee, just like running out of gas at all of the stations would achieve too, hehe).

The government owns a stake (sorry, I am not sure if it is a controlling interest) in the oil refinery for the DR. They process oil from Venezuela and Mexico there. The government's problem is having enough US$ on hand to purchase oil and/or fuel as it comes in, as those devils with the boats full of fuel normally seem to want cash on delivery.

ltsnyder said:

What I don't get is : 1) Does the Government force price fixing for gasoline in the DR? 2) Are the stations purchasing the fuel they sell from thier distributers? or is the DR government purchasing the fuel and in effect becomeing the distribute to all stations? 3) I read recently that a new shipment of gasoline, (or pre-gosoline petrol) was arriving in the DR in a week or so, does this indicate that the DR government is acting as a wholesale distributer of Gasoline? 4) Does the DR have the refineries to process raw petrolium into gasoline? If so are these refineries Publicy owned or privately owned? I don't understand why the price does not just rise to the point where supply equals demand.

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Perhaps Coastal will jump in here because he is the resident expert. If I answer incoreectly Greg, please feel free to lash me!

1) The government here does set prices for gasoline, and diesel. Just as they set rates for propane, rice, jet fuel and some other commodities. They do this so they supposedly can keep the masses happy by allowing sales below cost and making up the differences by government subsidy payments to the distributors.

2) Many stations buy their fuel direct from a government owned refinery and so are limited to what the government has available to sell. Others such as Greg's Coastal get their supplies directly from their homecompanies and do not have any shortage of product availability. However, the government forces them to abide by the same rationing quotas as all the others. So even though they could sell unlimited amounts, Baldy WON'T LET THEM!

3) The DR government buys crude for it's refinery. The refined product is then sold to the retailers who rely on the government supplies. Problem is the government is not paying for the shipments of crude (US$80M is needed each month) needed to run the country. The government ministry in charge of the refinery claimed they were paid by Baldy at like 35:1 in pesos to buy the petroleum they needed, but had to pay (they wouldn't say exactly)something over 55:1 to buy the dollars to pay the tanker. That's a serious cash shortfall. But it allows Baldy to claim he paid for the fuel (with worthless pesos) so it's not HIS fault.

4) I don't know how many there are. Maybe one? But yes they have, and that's where maybe 80% of the stations get their refined product to sell.

As to your last sentence I can honestly say I agree with you 100%. The problem would be solved for consumers if the price were allowed to float. The reason that doesn't happen is that it would lay bare Baldy's intervention and non payment if gas were plentiful at non-government supplied outlets, and non-existant at government supplied ones. It's all about CYA for them right now.

Tom aka XR

Fuel Supply

Hello, my name is Soo, how do you do?

I have only had a few posts to the board, but try to follow all threads as often as possible.

I have a question, please. Can anyone in the D.R. import their own fuel, assuming they have an import license or permit to do so? For instance, what do businesses like the tourist resorts do to assure that they always have sufficient fuel?

Thanks, Skipper

Soo

Answer to that is NO!

XR has it right on the money!

A few answers not already set forth

1) the Dominican government is part owner of the refinery with Shell. Esso tried to get into the game in the early 60s but was out manouvered(sp?) by Shell.
2) the refinery does NOT process crude oil. It purchases semi-processed crude and makes the final distillations here. it also imports the already refined stuff.
3) In theory you could import your own products but i think you would have to have deeeeeeeep pockets.
4) the hotel industry Mr. Soo is screwed, since they purchase their fuels from the local distributors-Texaco, Shell or Esso....or Isla...

HB

Exactly... so everypne gets their gasoline, diesel, kerosene, etc... from the refinary... so everyone must sell at the same price, wich is goverment regulated, not demand regulated as it is in the US.

And gasoline has an added tax to pay for the subsidising of propane gas, wich is sold at around 60-75% of its real price... because if gas goes too high all those poor people with no cars would get mad and then the political party in goverment will lose votes.

As far as importing fuel, I doubt it... unless it's something the refinary CAN'T provide... like jet fuel, or high octanage racing fuel.

The taxing and regulations to privately import, let's say, diesel, may very well be intended to make it a bad business.

No, That's Not Correct.

Guillermo P?rez said:

Exactly... so everypne gets their gasoline, diesel, kerosene, etc... from the refinary... so everyone must sell at the same price, wich is goverment regulated, not demand regulated as it is in the US. ... As far as importing fuel, I doubt it... unless it's something the refinary CAN'T provide... like jet fuel, or high octanage racing fuel.

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Not all stations purchase product from the government. Some do import for their outlets and franchises. Coastal is one for example.

Can't speak to the costs or taxes. But it must be profitable or they wouldn't do it.

Tom aka XR

Gasoline prices in the U.S. are partially controlled by supply and demand. The entire country is divided into tiny imaginery price levels. Many times within a single american town there could be up to 5 or more price level zones for gas stations. That is the biggest killer with the gasoline prices in the U.S. In the DR, it's more of the entire country being under one pricing plan. Of course, supply and demand don't have much effect in the DR gasoline market because of the usual dominican way of doing business, which usually involves some monopolistic styles. Thus, the country is stuck in second gear in most of it's industries.

Huh?

Nal0whs said:

Gasoline prices in the U.S. are partially controlled by supply and demand. The entire country is divided into tiny imaginery price levels. Many times within a single american town there could be up to 5 or more price level zones for gas stations. That is the biggest killer with the gasoline prices in the U.S. In the DR, it's more of the entire country being under one pricing plan. Of course, supply and demand don't have much effect in the DR gasoline market because of the usual dominican way of doing business, which usually involves some monopolistic styles. Thus, the country is stuck in second gear in most of it's industries.

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The D.R. stuff is correct. They need competition not universal government ordered pricing.

But where'd you get that hare-brained idea about the U.S.? That's called price-fixing and it's highly illegal in the U.S. for competing retailers to confer and arrange prices between them.Within the same company fine. But not between competing firms! Show proof of your 'price level zones' to a lawyer. He'll win you a lot of money.

Tom aka XR

XanaduRanch said:

The D.R. stuff is correct. They need competition not universal government ordered pricing.

But where'd you get that hare-brained idea about the U.S.? That's called price-fixing and it's highly illegal in the U.S. for competing retailers to confer and arrange prices between them.Within the same company fine. But not between competing firms! Show proof of your 'price level zones' to a lawyer. He'll win you a lot of money.

Tom aka XR

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Here in Los Estados Unidos gas prices depend on federal, state and local (city or county) taxes as well as prices set by the stations. In the Atlanta area alone, gas prices vary from county to county. For example, in Cobb county I purchased 87 Octane at $ 1.45US per gallon. In neighboring Douglas county, 87 Octane sells for $1.55 per gallon. These prices are from discount gas stations Quik Trip and RaceTrack. Exxon, Chevron and Shell generally sell their gas $0.02 higher than the discount gas stations.

Since the short lived gas cricis of last summer, many gas stations display a pie chart that illustrates the percentages of federal, state, and local taxes as well as profit margin per gallon.

The U.S. gasoline pricing style I learned from a one hour report about a year ago from ABC News (very respected news organization in the U.S.). All of this came to light because of the suggent jolts in pricing of gasoline across the U.S. but many areas had different price levels, many times within one town.

Coastal?... don't they have just ONE station?

That's interesting... importing fuel... investing, but no marketing... report taxes... hmmm.

GOOD.

not mentioned

Also in the US, in smaller markets, a tank farm is set up. All the majors put fuel into the farm where it is homogenized. The fuel is then shipped to all different private labels and franchisees at roughly the same cost, as compared to each other. Thus a small market may have their fuel at lower costs then the next market down the road, but if bought wrong that market could be much higher, but all the stations regardless of brand names will be roughly equal pricing, with the prices fluctuating each day as the tank farm relays the wholesale cost out to the stations.

Woooo-OOOOooh-OOoooh. Good Lord!

Nal0whs said:

The U.S. gasoline pricing style I learned from a one hour report about a year ago from ABC News (very respected news organization in the U.S.). All of this came to light because of the suggent jolts in pricing of gasoline across the U.S. but many areas had different price levels, many times within one town.

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ABC News! Well! Now we know where all that in-depth research comes from. :: sigh ::

Children. I swear!

Tom aka XR

Nal0whs, you are absolutely correct. Within the same town, often within the same block, you will find EXXON charging up to 0.15 more for the same grade of gasoline that you could find at a non-label gas station. I should know, I drive by them every day.

Pay not attention to XR, his ego sometimes gets the best of his mental capacity and his ability to read and reason.

And?

mondongo said:

Nal0whs, you are absolutely correct. Within the same town, often within the same block, you will find EXXON charging up to 0.15 more for the same grade of gasoline that you could find at a non-label gas station. I should know, I drive by them every day.

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And? #1: What does what you pay for gasoline in the U.S.A. have to do with the Dominican Republic and this message board?

And? #2: How does your observation change anything that I said? Which was simply that competing sellers are strictly prohibited by law from making any sort of agreement on retail pricing.

And? #3: Both of your observations of price differences offer proof of what I was trying to help you understand, and discount your statements.

And? #4: Who cares? It has no bearing on the DR system.

Ask a lawyer, go to your city hall and ask the local ombudsman or councilman about your theory of gasoline price fixing. When they stop laughing at you in five or ten minutes maybe they'll find a way knock the correct info into your head.

It's amazing to me how confident people can be of their positions when the sum total of their so-called knowledge is a tabloid TV program like the sensationl lowest common denominator pop journalism offered by U.S. network television. That's in the same category of all the know-nothings who regularly post about how life is in the DR that have never even set foot in the country.

Tom aka XR

apologies to Business Forum readers

1. What did naw0whs say to merit your name-calling? Who is the one acting like a child? "::sigh::"
2. You have the internet. You can google. Look up gasoline price zones.
3. Look up the term non-sequitur. Then re-read your comments.

Thats it for me here. The business forum does not need this type of useless discourse. Do your re-search and post something that increases knowledge of DR1 readers.

I do understand that it can be really difficult at times. But please try and stick even reasonably close to the subject at hand. OK? Your last post made no sense what-so-ever.

Tom aka XR