Fuel firm boss leaves islanders none the wiser about high prices

The head of GB Oils today struggled to persuade the council’s transport body why motorists in Shetland pay more at the pumps than their mainland counterparts.

Addressing a meeting of the ZetTrans committee, Sam Chambers denied his company was abusing its market dominance in the Northern and Western Isles, insisting there was a key difference between perception and reality.

In a well-mannered, hour-long meeting Mr Chambers agreed fuel was a highly emotive subject, adding some of his staff members had been subjected to abuse over the issue.

He said the Office of Fair Trading was automatically notified of any company which operated with a turnover of over £75 million.

But there was concern over why there was such a large differential between island prices and those charged down south.

Mr Chambers said his company had made a profit margin of 4.24 pence a litre in 2010/2011 on a litre of diesel, while transporting the fuel to Shetland had cost 2.7 pence a litre.

Many attending the meeting, including fuel retailers from around the isles, said roughly six pence per litre was left unaccounted for.

Andy Steven, of Promote Shetland, said he was increasingly “concerned and frustrated”. “I’m angry because we can’t get to grips with that 6p,” he added.

Mr Chambers insisted his company’s margins were reasonable, adding diesel was an incredibly expensive fuel to provide.

“These are figures the OFT have and they are open to be scrutinised by anyone. Fuel is expensive and we never thought fuel would become as expensive as it is now.”

He added the expected dominance in future years of bio-fuel would lead to a necessary overhaul of major infrastructure, even though the Scottish islands only accounted for two per cent of the volume sold.

Questioned by Scott Preston of Tagon Stores, which slashed its prices at the weekend to raise the issue of high fuel costs, he said he sympathised with people who – faced with petrol and diesel prices – had been forced to make some difficult choices.

“As I’ve said, the margins we get are not immune to criticism. But in reality, it’s a business and we have got to make a return.”

Also attending the meeting was isles MSP Tavish Scott, who had persuaded Mr Chambers to attend Shetland and address concerns.

Speaking afterwards he said: “It was good today that the council were able to bring together petrol retailers across Shetland, other interested transport parties and many other people to at least hear Sam Chambers explain what his business is and how much money they make on fuel in Shetland.

“I think there, at that point, we stopped understanding because there is still a difference between the gross margin that GB Oils make, and the difference between prices here and prices in the mainland, and that’s the difference we simply don’t yet have an answer for.

“We were there to establish what makes up that difference because that’s the most important figure in our ability to do something about it. If we were able to say, ‘look, it’s clearly profit being made by the company’ then we could say to the government  you’ve got statutory powers do something about it.”

COMMENTS(2)

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  • Stewart Mack

    • March 20th, 2012 8:54

    Intersting to see that initially Mr Chambers claimed his company only made 2.5p per litre, now we see he claims its 4.24p, but still a 6p shortfall in pricing. I wonder where that goes??

    Also why is Diesel “an incredibly expensive fuel to provide”? – That doesnt make sense, its a low fractionation of oil, and isnt nearly as combustable as petrol so the safety regs are not as severe as petrol. Once again Mr Chambers either doesnt understand his products or is simply choosing to mislead. Which is it? – Or feel free to exdplain why Diesel is an incredibly expensive fuel to provide…… i wait with baited breath….

    REPLY
  • Colin Hunter

    • March 20th, 2012 14:26

    It was interesting to note that Mr Chambers now seems to be trying to direct the blame towards the retailers. Is it not the case that GB oils now owns the retail outlet which used to be known as “Leasks”? Therefore he should be able to undercut every other retailer and still make a decent profit. If the cost of transporting fuel to Shetland is 2.7p a litre, then that’s how much more it should cost, within reason. Every retailer and distributor, whether mainland or island based, has the same, or very similar, overheads, so those costs can be largely cancelled out. The ONLY extra cost as far as I can see, is the sea passage from Grangemouth to Lerwick, which by his own admission, adds 2.7p. The operation of the depot at the North Ness probably adds a penny or so, but every distributor has a tanker fleet to maintain, drivers to pay and other overheads, which they also have. They don’t buy the fuel from another distributor, it comes directly from the refinery so there is no “chain” from manufacturer through wholesaler, retailer etc, with every link taking a cut. There are three.
    Namely:
    1. A sea journey from the mainland……2.7p
    2. Storage and distribution….. Similar costs to mainland operators.
    3. Retail……….Each outlet must maintain pumps and tanks to recognised standards.Costs per unit are probably higher due to lower throughput and, particularly, remoteness and distance from the depot. Again, similar to remote Mainland areas.

    I can see that, because of the very rural nature of Shetland, places with lower populations may have to pay more for the convenience of having a small scale local outlet, but that does not explain the higher prices paid in Lerwick than in Yell, for instance. Come along Mr Chambers, there’s another conundrum for you to wriggle out of!

    REPLY

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