OIL COMPANIES rarely waste time in putting up pump prices once the world crude oil price goes up. They could have two months’ supplies, bought at the lower price, but grab the opportunity to increase profit margins as soon as it comes up. When the world crude oil price goes in the opposite direction, it takes months before consumers benefit from lower pump prices and usually there has to be some pressure from consumer groups and the media.
This is how things have always worked, regardless of the complex methods of calculating the pump prices that companies charge. Not surprisingly all companies increase pump prices, invariably, at the same time, raising suspicions of price collusion. There have been several half-hearted attempts by successive governments to tackle the problem – a plafond was imposed at one stage but proved totally ineffective – including simplifying the calculation of prices but nothing has ever worked.
The only way to bring the oil company oligopoly into line would be to try to build a case of price collusion against it and impose hefty fines. This had happened in the past, with fines of tens of millions of euro imposed on each company by the Commission for the Protection of Competition (CPC), but the decision was declared null and void by the Supreme Court on the grounds that the head of the CPC did not have the qualifications, stipulated by law, to hold the position. Since then, very little has been done, although the CPC undertook another investigation two years ago.
Admittedly, it is difficult to have real competition in a market as small as Cyprus’ in which 90 per cent of petrol is supplied by the same refinery (all companies pay the same price), but that does not mean the authorities should turn a blind eye to the possibility of price collusion. If the CPC builds a strong case against the companies and eventually imposes hefty fines that cannot be overturned on appeal the companies might be less inclined to pursue a ruthless pricing policy which pushes up pump prices as soon as there is an increase in in the crude oil price and takes months lower them when the crude oil price falls.
Whether this would ever happen, remains to be seen, but consumer groups should keep up the pressure as should the media. We should not expect too much from the government which benefits from high petrol pump prices, through increased tax revenue. The CPC however is an independent body which is obliged to act when there are allegations of price collusion by organised groups or members of the public.