More expensive days ahead?

For thirty two-year-old David Patrick, going out fishing has become something that he has to think about first before making a decision on the matter. Patrick, a fisherman from Koblerville, used to go fishing at least five to six time a week but, with the price of fuel having gone up, he is now forced to cut back on his trips.

“I can understand why prices are rising all over, but honestly, I can feel that it’s affecting me and others also,” said Patrick. “I have a small boat and before, I would go fishing at least five to six times a week, but now, I can’t go as much because buying gas is very expensive. I also have to think about income, but that is not much, so I can’t really afford to buy as much gas as I used to.”

With the price of oil hitting an all-time high of $55 per barrel worldwide and the series of fuel price increases in the Marianas, local consumers, businesses and all sectors are experiencing the domino effect on the rising prices of commodities.

Pump prices on the islands have already soared to $2.899 per gallon, and with more than eight rounds of increases since January, the situation has left consumers speculating that the trend would most likely continue.

Even the price of pandesal at a popular bakery store has gone up. The usual 10 pieces of pandesal for just a dollar are down to just eight pieces for the same price—Herman’s Modern Bakery’s way of adjusting to the rising cost of doing business.

“Any increase in price in fuel affects our operations because we depend largely on fuel,” said bakery president Juan T. Guerrero. “It will have an impact on the price of pandesal or sweet bread.”

Guerrero said practically all of the bakery’s raw material needs—including flour and salt—are imported, except for water that undergoes a process of filtration. Bringing in these items now come at higher prices, according to Guerrero, due to increase in freight costs.

Major ocean shippers Horizon Lines and Matson Navigation Co. recently raised their fuel surcharge from 8.8 percent to 9.2 percent, citing fuel price increases.

Guerrero said the bakery also depends on diesel for baking in the ovens. The bakery’s vehicles also use fuel to deliver bread and pastries to stores and retailers.

“The continuing increases will drive the cost of doing business,” Guerrero said. This coming Thanksgiving, Guerrero said the price of the turkey package would certainly increase from last year’s $45. He said, though, that the bakery would add a product to the package, a marketing strategy to maintain its attractiveness.

The increases in gas prices have trickled down to the community, with several residents expressing concern that rising cost of commodities would drain their pockets. These increases have also forcibly changed the driving habits of motorists, with some disclosing that they have to maximize their travel on the roads.

“I live in Kagman and sometimes I want to visit my family who live on the other side of the island. Before, I could pump $20 worth of gas into my tank and that will last me a long time. Now, even that $20 gas seem to be not enough, and the situation is hard for me,” said 39-year-old Charles Angeles.

Jesse Sablan, a 19-year-old student at the Northern Marianas College, said he has to refrain from traveling to his San Roque home to take his lunch to save gas on his vehicle.

Increased prices in commodities

At a popular supermarket on Saipan, prices of several commodities have gone up. Milkfish, which used to sell at $1.20 per pound, is now $2.19. The price of tilapia also rose from $1.99 to $2.29 per pound; ground beef, from $1.80 to $1.99 per pound; and refill pack coffee, from 99 cents to $1.09.

Wholesalers are forced to pass on to retailers the increasing cost of doing business. Micronesian Brokers Inc. general manager Kitz Barja said that, after holding on to wholesale prices for several months, the company had to make price adjustments beginning August.

“Fuel prices have been going up steadily. When Matson raised freight charges, the cost of the products went up,” Barja said. “We have to pass on some to retailers, but we try to keep it to a minimum.”

MBI wholesales frozen products, dry goods and health and beauty products, among many other merchandise. To cushion the impact of increasing costs, Barja said he has been meeting with MBI’s suppliers from the Philippines, Hong Kong, Australia and the United States to help the company defray them through rebates. “We also have our obligations to retailers and the consumers,” Barja said.

AGO monitoring situation

CNMI consumer counsel Brian Caldwell recognized the ripple effect of increasing fuel prices. Naturally, he said, added cost in shipping a product to the CNMI would be reflected in the price of the good. Increased production cost for fuel-dependent products that are produced within the islands would also raise prices.

“However, it is difficult to know in uncompetitive markets how much of any given price increase is actually attributable to the higher cost of fuel. Undoubtedly, some merchants use increased fuel costs as a pretext for raising the price of their goods over the competitive level,” Caldwell said.

“The reason the government encourages competition in the marketplace is because competitive markets set prices where marginal cost equals marginal revenue. In this way, the consumer can be assured that the price they pay reflects the actual cost of the product,” he added.

Caldwell said his office has yet to receive any feedback from the Federal Trade Commission regarding the complaint he filed regarding Mobil’s retail prices. The CNMI Attorney General’s Office has joined in the FTC’s national gas price-monitoring campaign.

As early as April, Caldwell initiated a letter/complaint to Karen Berg, coordinator for State/Federal Relations of the FTC’s Bureau of Competition, stating that fuel prices in the Northern Marianas are very high. Caldwell sought the FTC’s assistance in ascertaining whether or not anomalies in trade practices are actually occurring in the Marianas.

At that time, Mobil gas stations on the islands retailed regular and super gasoline at $2.539 and $2.629 per gallon at full-serve rate. Self-serve rate for regular and super gasoline then reached $2.329 and $2.429, respectively.

Gasoline nearing $3 a gallon

To date, regular and super gasoline at full-serve rate sells at $2.809 and $2.899 per gallon, making the cumulative gallon price adjustment for the year at least 49 cents. Self-serve gallon rates are $2.599 and $2.699, respectively, while diesel retails at $2.709 per gallon.

Shell outlets now retail a gallon of regular and premium gasoline at $2.599 and $2.699, respectively at self-serve rates, while diesel sells at $2.779. Full-serve rates for regular and premium gasoline are $2.709 and $2.799 per gallon.

“We have not received any feedback from the Federal Trade Commission yet. Pursuant to the FTC’s gasoline price monitoring project, they are to alert this office whenever they notice unusual pricing activities—i.e. anomalies. These alerts may be in response to consumer complaints passed on by this office, or in response to monitoring undertaken independently by the FTC,” Caldwell said.

“The most typical type of pricing anomaly that would trigger an alert would be a price spike—a sudden, drastic increase in the price of gasoline. The pricing pattern in the CNMI has been one of sustained increases over a relatively long period of time. This type of pricing pattern in unlikely to catch the FTC’s attention,” he added.

Caldwell said his office does not regularly monitor the price of goods sold in stores, but rely heavily on consumer complaints regarding prices.

“As a general rule, however, stores may sell their products at whatever price they want. There must be some unfair or deceptive practice involved in order for this Office to have jurisdiction to act,” Caldwell said.

Mobil Oil Marianas public affairs manager Cecile Bamba Suda attributed the fuel increases to global and regional factors, including increases in crude oil prices, freight cost increases, supply concerns and increasing demand.

Shell Marianas president Phil Stalker, on the other hand, said that market forces in Asia have forced a significant increase in the cost of refined product, adding that the cost of crude oil has hit record levels.

Stalker has consistently assured that Shell would roll back pump prices once market conditions improve. As world crude prices breach the $50-benchmark, no price rollback has taken place so far. (With Shan Seman)