Thursday, May 22, 2008

Competition - We want it!

In a published article recently, oil companies that import gas and diesel into Honduras threatened to halt all new investments in the country on Tuesday if the government does not change a price scheme they say is hurting their profits.

The companies say the government formula prices regular, lower-quality gas the same as the more expensive premium variety, eating into the companies' profits. The losses mean the companies have had trouble keeping up oil terminals, which has led to shortages in recent weeks, said Sr. Sierra. But the government says the oil and gas companies have priced their services too high and the formula is a necessary measure.

In May, leftist President Manuel Zelaya threatened to take state control of the country's gas depots after diesel shortages hurt the transport system in the country, including public buses and garbage collection trucks.

So, for now, there seems to be a fight on between the Honduran government trying to keep prices in line and the oil company distributors who, I would think were taking their share of the huge profits that the oil companies have reported, are crying that their profits have been hurt.

I wonder just how much “hurting” is actually done? Are they losing 1% of their profits, 10%, 25%? I don’t necessarily agree that government has any right to tell companies what to charge for their product, however, since Honduras is not really a place where competition is welcomed and there is no mind set that if someone sells it cheaper the other guy will lower their prices. I don’t know what the answer to this dilema is but I’m all for the system that allows competition.

Take life on the island for example. We have one deposito which sells beers and frescas. A few years back someone here decided to go into competition with the “one and only deposito” and brought beer and frescas to the island on their boat. They began selling the product at a lower cost and gave better service. Well, the big honcho here didn’t like competition and opened up another deposito which made it easier for people driving boats (which is everyone) to drive up and purchase their product. They also lowered their price below what was being charged by the competition. Well, it didn’t take long before the new boys in town were put out of business. You got it - right after that, the big honcho closed the “convenient” store, raised his prices and is once again the only game in town. Also, when one of the beer companies decided to change the labeling on their beer bottles, this individual would not take back the empty bottles to return to the distributor nor give the deposit back that was put down on the bottles! Deposit in Honduras means you’ve just bought it so don’t ask for the money back! So, in this case the competition caused a lowering of prices, but only to serve a means to an end - the one and only distributor was back in business charging whatever he wants. Airlines that have served the island have done the same thing, lowered their prices and waited until they drove the competition out of business here. Competition is simply frowned upon in Honduras in my opinion. Now with the gas problem rising its head we wonder what will happen here on the island.

Last month electrical service was interrupted for several hours each evening because the electric company did not have enough fuel available and was having trouble obtaining more fuel. On the Mainland they have a little more leverage because more “important” people live there, more services are offered, and more people depend upon the fuel than on a little island with no roads.
The lack of fuel would harm all the islanders - if only because the only way we have available to us to get from one place to another is by boat! Oh, there are trails for walking but would you walk several miles to buy needed items and carry them back along the same trail? We are talking a “trail” here, not a wide, paved sidewalk. A trail through the high grass, up mountains and down valleys. Wide enough for maybe one person, unlit and dangerous.

So, I just hope they can all iron out their difficulties soon and reach a settlement so life can go back to normal.


  1. Sharon, what everyone does here, especially with hurricane season getting closer, is start filling 5 gallon cans. I have a neighbor who will have 20 five gallon gas cans in his garage by the end of June.

    Is he crazy? You bet he is! That's easy for me to say because I have natural gas to the house. Of course if he doesn't need the fuel for any emergency he will start putting it in his vehicles and boat in the fall. What else can you do?

  2. From your comment I have to assume you live in the states ("natural gas to the house"). Here on the island, storing gas for any length of time is not a good idea. The longer the gas sits the more problems you will have with it. It turns to a jelly like substance as evaporation takes place (even in a closed tank) and gets "gooey". So, even if one stored it for two months, it would have a different consistency and with the hurrican season being 5-6 months long, well, you do the math.