Firms brace for increased LPG prices

With the looming increase in liquefied petroleum gas prices, some commercial establishments are already bracing for its anticipated impact on the cost of doing business.

Aqua Resort Club, a hotel and restaurant establishment, consumes some 1,400-cubic meters of LPG monthly for its kitchen alone.

ARC comptroller Joey de Jesus said the company spends some $4,400 monthly for its kitchen’s LPG consumption.

“What we have to do is check on other areas where we can control costs,” De Jesus said.

ARC sales and marketing manager Dorry Gabutero said the hotel has recently acquired a gas-water heater system, which uses LPG for 24-hour hot water service to all 91 rooms.

Gabutero and De Jesus said consumption and cost figures have yet to be ascertained as the system has just been recently installed. But Gabutero said: “I guess we will be affected by the LPG price increase.”

Naked Fish Bar & Grill, a Beach Road, Garapan restaurant that has been in operation for a few months, consumes about four 90-lbs LPGs a month.

“Of course, increase in LPG prices would affect the business, especially when it is struggling and the cost of doing business would increase,” said John-John Cruz, one of its managers.

The impact of an increase in LPG prices could also affect commercial Laundromats, which use LPG for their dryers.

At the Coin Laundry on Middle Road, Gualo Rai yesterday afternoon, only a few customers could be seen drying their clothes when the Saipan Tribune visited the establishment.

“The increase in LPG prices is not good,” said laundry attendant Malou Narvasa. “Only a few people come here during regular days.”

She said an increase in LPG prices would mean additional cost for the company. She expressed hope for an eventual price rollback when market factors ease.

Increased freight costs following consecutive fuel price adjustments have begun to impact the LPG distribution industry on Saipan, with major players disclosing plans to increase prices by up to 15 percent very soon.

By May 1, Saipan Industrial Gas Inc. will implement price increases that will peg the price of 90-lbs LPGs at $79 each at delivery rate, higher by $4 than the current price of $75. Pickup rate will increase from $72 to $75.

For 40-lbs LPGs, the prices will increase by $6 per tank. Beginning May 1, delivery rate will become $45, while pickup rate will increase to $42. The new prices for 20-lbs LPGs will increase by $2 and will become $25 and $22.

Saipan Industrial Gas Inc. general manager Dionesio Lopez projected that the average price of a 90-lbs LPG would be $77, higher than the 2004 average price of $70. He noted, though, that the LPG industry on the island has been very competitive, noting that prices used to be as high as $120 per cylinder. It was not clear if the company offers special rates or discounts for commercial and bulk consumers.

The company’s competitor, Wushin Corp., also plans to implement price adjustments. Wushin’s retail arm, D & L. Corp., disclosed that the parent company had already received a notice from its Guam supplier, South Pacific Petroleum Corp., about increased freight costs.

Wushin sells LPG at $75 per 90-lbs cylinder; and $44 and $20 for 50-lbs and 20-lbs cylinders, respectively. The company has yet to announce when new prices will be implemented.

Saipan Industrial’s Lopez said that higher freight costs have pushed up Shell Marianas’ LPG prices. Lopez said his company decided to increase household prices of LPG on Saipan to cushion the impact of Shell’s price adjustment.

Lopez recently received a letter from Shell, which claimed that freight rate increased by $160 per metric ton.

“The product add-on amount of $505.37 per metric ton has been maintained since the start of the LPG distribution contract in 1993. The increases in freight cost in the past years has compelled us to review and consequently adjust the PAO amount,” said Shell North Pacific Cluster general manager Ruben Mario A. Domingo, in a letter to Lopez.

“In 2005 alone, the freight rate will increase by $160 per metric ton. The new rate takes effect…[on March 15, 2005] and will be valid until March 14, 2006. We are therefore adjusting the PAO to $665.37 per metric ton effective April 15, 2005,” Domingo told Lopez.