06 February 2007

Cross-Border Arbitrage

In forty years of big firm law practice, I never got involved in this area of commerce. Time to learn. Nothing like a threat to one's personal expense budget to stimulate the educational process.

Retirement in St. Barths is not inexpensive. (Sorry, I remain a lawyer and therefore remain inclined to the use of double negatives.) Part of our regular expense budget goes to purchase fuel, an expenditure I resent because I need to save my money to give to the island's restaurateurs. Happily, we need no fuel to heat the house, just energy to heat the hot water. For some reason, hi-tech has not arrived on St. Barth and if there is a real solar water heater on this island, I haven't seen it. So we rely on two basic energy sources:

i) The itsy bitsy solar heater. The garden hose sits in the sun, and the water is hot when we wash the sand off our feet upon returning from the beach,(take that, OPEC!), and

ii) Electricity for light, hot water, air conditioning, etc, supplied by EDF, the government-owned power company. Their product is produced at a generating station in Public, and the fuel for that plant is a combination of the garbage collected locally and Number 6 oil delivered by tanker. So our electric bill reflects the cost of the oil burned to produce it, but the petroleum product is an indirect cost, and we don't really see and appreciate its significance to our lives here.

Ah, but when it comes to direct knowledge of the cost of petroleum products, we have the gas station in St. Jean, across from the airport. There is nothing indirect or hidden about the cost of gasoline: one pays very directly for every liter. Yup, liters, not gallons. The price at the pump (there are two gas stations on the island. What a coincidence—they both charge the same price) is 1.25 Euros per liter. So to get a gallon of gasoline, one must purchase 3.79 liters of the stuff. After struggling with the calculator function on my Blackberry, I have arrived at a computation that startles: at the current exchange rate of $1.30 to the Euro, gasoline costs $6.14+ per gallon. So when I put 20 gallons of gas in my piggy Jeep Wrangler, we are talking about $120 per tank-full. Talk about pain at the pump, especially since that thrifty made-in-Detroit vehicle gets 6 miles per gallon on these hills. (For 2007, Chrysler has introduced a new Wrangler: same engine, same transmission, just longer and heavier body. At this rate of progression, the thing will need a tanker escort to get to and from the gas station.)

But all that is peanuts when it comes to Fish Faster, my 30' Grady White fishing boat. Sporting a pair of thrifty Yamaha 225hp four-strokes, she burns 21 gallons per hour at a cruising speed of 25 mph. (And that's a lot better than the older two-stroke engines, which got less than mile to a gallon of gas.) So a two hour jaunt around the island in Fish Faster costs about $250 at St. Barths prices. But then again, one cannot buy gasoline for boats like mine in St. Barths. Believe it or not, there is NO marine fueling facility. NONE. There was one in Public a few years ago. They decided to upgrade it. Predictably, once they shut it down, there was no way they could re-build it in compliance with the new environmental regulations.

So the owners of small boats, the ones with a single 40 hp engine, for example, go to the gas station in their cars, fill up a couple of 6 gallon plastic containers, put them in the trunk, and bring them to their boats, either at the dock or a mooring the harbor. Bigger guys, like me, with boat tanks holding 200-300 gallons, simply cannot gas up on this island. And a good thing too, since a load of gas could cost $1500 and up!!

For reasons that totally escape me (Taxes? Nah!), while gasoline costs $6.14 per gallon in France, it costs $3.53 per gallon in the Netherlands. Same gas. Same European Union. And that $3.53 is AT THE DOCK. (In the US, gas costs from 50 to 75 cents a gallon more at the gas dock than at the land based station.)

Hence, the international arbitrage.

Fifteen miles northwest of St. Barths lies the island of Saint Martin/Sint Maarten; half French, half Dutch. On the French side (St. Martin), they speak French and English, the currency is Euros, and gasoline costs 1.25 Euros per liter, the same as here. On the Dutch (south) side of the island, ( St. Maarten), the lingua franca is English, the currency is US Dollars, and gasoline at the marine dock costs USD 0.93 per liter, or $3.53 per gallon. A round trip to and from St. Maarten from Corossol Harbor burns 20 gallons of gas, and you get, as a bonus, a day at sea, visit to a different island, and lots of shopping on St. Maarten's main drag, if you so choose.

A problem: The sea between St. Maarten and St. Barths, is, to use my favorite Montauk fishing boat captain's understatement, "snotty." Ferry passengers crossing that strait are not given the little paper bags found in airliner seat pockets: they are supplied with Glad "Large Kitchen Bags". So Barthian small boat owners scan the horizon each morning. On the rare day when no whitecaps appear, construction on the island slows, the garbage dump goes on short staff, electric and water services are curtailed, and Le Bureau de Poste has an excuse for not delivering the mail. The armada of 20-30 foot boats departs the several St. Barths harbors and reassembles at Bobby's Marina in Phillipsburg Harbor in St. Maarten, where Alvin and Webster are pumping $3.53 gas.

Think state of the art marine facility: 100 foot long gas dock, fenders deployed against the swell, three gasoline pumps in shiny metal cabinets, a diesel pump, water hoses, dock lines available for tie up, just like in the boating magazines. In your dreams. This is the Caribbean, and what you get is a 50 foot long dock in gross disrepair, one working gas pump, which is an exposed array of pipes with a gauge. The pump is started manually by Alvin—that is when it is your turn, of course.

I was pleased to see only one boat fueling at the dock when I arrived. I figured it would be my turn in five minutes. The vessel in front of me was a do-it-yourself craft obviously used for diving trips. She was about 30 feet long, broad in the beam, and powered by twin 200hp Johnson two-stroke outboard engines, which, in case you did not know, burn a mixture of gasoline and oil.

How many of you remember those great radio (tv?)commercials for Piel's Beer, starring two wonderful radio voice guys who played the brothers Bert and Harry Piel? My all time favorite was the spot in which Bert interviewed Harry playing the role of the newly crowned winner of the World's Slow-Talking Contest. After listening to Harry for 20 seconds, you wanted to reach into the radio and strangle him. Hilarious. I still laugh when I think about it.

What brought it to mind was watching this guy fill his gas tank. He was obviously not very good at arithmetic, and knew only that for each six gallons of gas, he needed to add four ounces of outboard motor oil. So I watched for 20 minutes as he carefully tilted his one gallon oil jug so as to pour exactly four ounces into a plastic measuring cup, emptied the cup into a funnel protruding into the fill pipe of his 250 gallon gas tank, then pumped six gallons of gas into the funnel. This was done very slowly because he could not see the pump gauge and Alvin had to call out the gallons, one by one. This cycle was repeated about 25 times. Not too long ago I would have done something more than what I did on this day, which was to sit in the fighting chair on my boat, swivel so I faced the sun, put my head back, close my eyes, and smile, wondering what happened to Bert and Harry, and to Piel's beer as well. All retired, like me? Only if they are very lucky.

When my turn came, I filled both tanks. 714 liters (189 gallons) at a cost of USD 664.02. Twice during the refueling, the pump stopped because a fuse blew somewhere in the marina. And when my tanks were topped off, I had to wait another ten minutes for the computer that reads the credit card to come back on line. The sun was shining. Alvin and Webster were entirely pleasant, and while other boat owners were loitering about the dock like sharks waiting their turn to feed on a dead whale, nobody was cursing, blowing a horn or otherwise behaving like a North American. I was happy. After all, I had just "saved' about five hundred bucks. (Yes, I realize that is much like saying you "saved" money by buying at a marked-down price something you did not need, but this is my BOAT.)

The trip back across international boundaries to French St. Barths was uneventful. No customs or border inspections or other hassle. And it's a good thing, too, because it never occurred to me take my passport until Dofie mentioned it half way to St. Maarten.

We zipped back to Corossol harbor, gawked at two megayachts anchored in the bay, and approached my dinghy with my bow into the wind. The Walker Bay rides on a 20' long 3/8" line attached to the 1" line attached to the mooring buoy and I need to snag the smaller line with the boathook without getting the line in the props, put the boat into neutral, pull it forward and wrestle the 1" mooring line aboard and slip it onto the bow cleat, shut down and raise the engines, close the GPS box, turn off the switches, drink my celebratory warm beer,--on the islands, it is always Miller Time when you tie up the boat, the clock is irrelevant-- and climb into dinghy and hit the beach for lunch.

This year, I travel to and from the beach via the power of a 2.5 hp Mercury outboard—no more fears of being blown to Dominica while I try vainly to row against the strong easterlies. As ever, when approaching the beach, one needs to avoid running into the tots playing in the knee deep water at the edge of the sand. It is, of course, their beach too. In Paradise we share.

A bientot.

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