By Elias Hazou
Parliament intends to draft a bill forcing fuel importers to immediately disclose the cost of their shipments, thus shedding light on their pricing policy, which continues to baffle consumers.
There had been much talk of a legal amendment compelling oil companies to promptly provide data to customs authorities upon arrival of each consignment – but nothing has been done to date.
Chair of the House commerce committee Angelos Votsis (Diko) said this week that at its next session the committee would bring a legislative proposal obliging companies to furnish this data within a week of receiving any shipment, in a bid to boost transparency.
MPs were discussing for the umpteenth time what is known in the industry as the “rockets and feathers” phenomenon. When oil prices rise after being steady for some time, gasoline prices shoot up quickly. In contrast, when oil prices fall after being steady for some time, gasoline prices retreat slowly.
Quickly rising fuel prices at the pump in recent weeks prompted some lawmakers to cry foul over oil companies raking in super-profits. Some even resurrected the notion that the commerce minister should consider imposing a price ceiling.
The commerce minister is empowered to issue a price cap decree effective for 45 days.
But commerce ministry officials shot down the idea, which has been tried and failed in the past.
For its part, the finance ministry said it had no intention of slashing the consumption tax on fuel (€0.49 per litre) as there was no means to recover the resultant loss in tax revenues.
The auditor-general’s office meanwhile told MPs it was satisfied with corrections made to the formula used by the commerce ministry to monitor fuel prices.
But Edek MP Elias Myrianthous noted that between June 2014 and early January of this year, global crude prices – taking into account the dollar to euro exchange rate – have dropped more than 37 per cent.
What’s more, refinery costs in the Mediterranean region also fell in 2016. Nonetheless, said Myrianthous, there has been no proportionate decline in retail prices.
He added that no one can explain the discrepancy, going on to speculate that “either some people are not telling the truth” or that certain fuel importers may have a stake in the refineries they use.
Cyprus imports refined petroleum products.
Oil companies argue that since they buy refined fuel and don’t deal in crude oil, one shouldn’t expect a 1:1 parity between fluctuations in Brent and gasoline pump prices.
Among others reasons, the rockets-and-feathers effect is attributed to fluctuations in supply and demand, and to inventories.
The latter appears to be key in Cyprus, with some long suspecting that importers manage their inventories in such a way as to make more frequent shipments whenever prices are on the up, and vice versa.
According to the European Commission weekly oil bulletin, on January 2 of this year Unleaded 95 in Cyprus averaged at €1.203 per litre after taxes.
The EU average was €1.373, and the euro area average at €1.412.
Before taxes, prices in Cyprus are consistently higher than the EU average, and vice versa where after-tax prices are concerned.
According to the commerce ministry’s consumer protection service, the pump price of €1.203 consisted of the following: estimated mean weighted cost of product €0.399; estimated mean gross profit margin €0.122; consumption tax €0.49; VAT: € 0.192.
The government guarantees fuel importers a profit margin.
The Sunday Mail compared benchmark ICE Brent to retail prices in Cyprus for various dates going back to 2014.
On December 19, 2016, ICE Brent went for $54.92 per barrel, while the average price of unleaded 95 per litre in Cyprus (inclusive of duties and taxes) was €1.190.
On January 18, 2016, Brent was $28.55, Unleaded 95 went for €1.121.
May 4, 2015: Brent $66.45; Unleaded 95 €1.276.
September 4, 2014: Brent: $100.20; Unleaded 95 €1.421.
January 20, 2014: Brent: $106.35; Unleaded 95 €1.398.
December 1, 2014: Brent: $72.54; Unleaded 95 €1.324
December 8, 2014: Brent: $66.19; Unleaded 95 €1.303
And in a related development, the Commission for the Protection of Competition (CPC) said this week it was close to issuing findings in two cases.
The first relates to a sector-wide probe, launched some two years ago, into the prices of unleaded 95 petrol, unleaded 98 petrol, diesel, heating oil, and gas.
The investigation, covering the 2008 to 2014 period, concerns the entire supply chain – importation, transportation and storage – its purpose being to establish any distortion or impediment to market competition.
The trigger for the investigation were complaints by individuals and groups, as well as press reports here and abroad that retail prices in Cyprus were not in tow with sharply falling petrol prices globally.
The CPC’s other findings will relate to the re-investigation of the price collusion case of 2009. The CPC at the time slapped oil companies with some €40 million in fines, but the decision was later voided at the Supreme Court on a technicality.