A government official is less than pleased with most of the members the business community for failing to reduce the prices of their goods in light of falling oil prices on the international market.
Director of the Department of Commerce and Consumer Affairs, Terry Bascombe, said he is unhappy about the situation and has challenged the merchants to recognise the intelligence of the Barbadian public and address the situation.
Cognisant of the fact that the high cost of living was mostly precipitated by external factors such as their high price of oil, the price of goods from the supplier, high transportation and logistics costs, as well as demand and supply conditions in markets for essential raw materials, he argued that the savings that had been passed on to consumers by some merchants were miniscule.
“Economic theory explains that prices, particularly in product markets, tend to be ‘sticky’ downwards due to several factors, some of which are industry-sensitive. For example, local retailers, because of their failure to join forces, may lack the necessary retailer power to influence the prices of products they purchase from overseas suppliers. On the other hand, in anticipation that energy prices may increase in the future, food merchants may be reluctant to pass on the savings they now enjoy to consumers. The fact that food prices are not showing any satisfactory decline may also be a function of limited competition or strategic wait-and-see games among retailers,” he argued.
In light of this, the Director has urged merchants to reduce their prices on the heels of falling energy prices.
“I can draw on written submissions from some merchants who wrote to us 18 months ago, requesting meetings with the Department and the Minister. In those submissions, the main, and in some cases, sole justification they advanced for imminent price increases was rising international energy costs. The world has now seen a drastic reversal in that trend, but yet, prices have either remained the same, or in some instances, have gone up,” Mr. Bascombe remarked.
Referring to the food sub-index, which forms part of the overall retail price index published by the Barbados Statistical Service, Mr. Bascombe lamented that between January 2008 and October 2008, all food sub-groups, with the exception of fruits, recorded steady increases in their respective sub-indices. He suggested improvement in the efficiency of operations as one possible means by which merchants should be able to reduce their own operating costs and consequently the prices of goods.
He said his department had built up a good rapport with the business community and hinted to greater dialogue with the sector during the year on this and other issues.