President Nikos Christodoulides on Tuesday said that the government has “invested more than a billion euros” in its efforts to ease the rising cost of living, when he was asked what the government is doing to “mitigate the phenomenon” of Greek Cypriots using Turkish Cypriot petrol stations to fill their vehicles with fuel.

“The government has invested more than one billion euros to address the impact of rising prices, particularly regarding fuel, which are driven by external rather than internal factors,” he said.

He added that “it is a very fortunate circumstance that the government has the financial capacity, precisely because of our responsible fiscal policy, to support our fellow people”.

“We are here, evaluating measures, data and prices on a daily basis and intervening, and I am pleased, I repeat, that we have the ability to intervene, whenever and wherever necessary,” he said.

The government had last week announced a package of measures worth €70 million aimed at easing the cost of living, with those measures including reducing the excise duty levied on heating oil from 7.4 cents to 2.1 cents per litre – the minimum level permitted by the European Commission.

Additionally, the rate of fuel consumption tax remains at 8.33 cents per litre, with the government regularly announcing extensions to that temporarily reduced rate, which was initially introduced in 2023.

However, despite this, petrol station owners’ association chairman Christodoulos Christodoulou had warned on Monday that prices at the pump will continue to increase this week, with the price of a litre of diesel having gone above €2 last week.

At present, he said, the average price of a litre of diesel is around €2.03, with prices ranging between €1.94 and €2.12 per litre, while the average price of a litre of 95-octane petrol is €1.74, with prices ranging between €1.66 and €1.82, but said that these numbers will likely increase due to high global oil prices.

Price of crude oil now falling, but reduction not yet passed onto consumers

The price of a barrel of crude oil peaked at a little over $106 on September 15, and as of midday on Tuesday now sits at $87 and is on a gradual downward trend, though due to the lengthy supply chains involved, it will take weeks for this reduction to be passed onto consumers.

Christodoulou went on to say that the price of fuel in Cyprus is also impacted by the price at which it is sold by refineries in Greece, given that Cyprus does not have oil refineries of its own and therefore cannot buy crude oil itself.

Given these high prices, anecdotal reports have suggested that many more Greek Cypriots have elected to refuel their cars at Turkish Cypriot petrol stations, where prices are markedly lower.

Prices at Turkish Cypriot petrol stations are uniform and set by a joint committee of representatives of petrol station companies and the Turkish Cypriot authorities.

At present, a litre of 95-octane petrol costs 77.12TL (€1.39), while a litre of diesel costs 76TL (€1.37) at Turkish Cypriot petrol stations, making them markedly cheaper than their Greek Cypriot counterparts.

The authorities in the occupied north have since March zeroed six fuel-related taxes in an effort to stem rising prices.

Since then, value added tax on fuel has been zeroed, fuel tankers docking at Turkish Cypriot ports are not subject to any docking fees, while no customs duty is paid on the fuel they import, and fuel retailers’ contributions to the Turkish Cypriot agricultural insurance fund and tourism incentive fund have also been zeroed.

In addition, municipal weighing fees – a tax paid by businesses to the municipality in which they are located based on the weight of goods sold – have been zeroed for fuel.

Reducing VAT on fuel illegal in EU, Yemeni govt retakes Bab al-Mandab

Reducing VAT on fuel is illegal under European Union law, though with Turkish Cypriot petrol stations not being subject to it, some, including former Edek leader Marinos Sizopoulos have complained that Greek Cypriot petrol stations are subject to “unfair competition”.

More recently, German Economy Minister Katherine Reiche said earlier this month that it would be “sensible” for VAT on fuel to be temporarily reduced inside the EU, though last week, European Energy Commissioner Dan Jorgensen appeared to side against the idea, saying that “it is important to stick to temporary and well-targeted measures”.

However, better news for oil prices may be coming from further afield, with the Saudi-backed Yemeni government reporting late on Monday night that they have retaken the crucial Bab al-Mandab strait from the Iran-backed Houthi movement.

Around five per cent of global oil supplies passed through the Bab al-Mandab strait in February, typically passing northwards towards the Suez Canal and the Mediterranean beyond. The Yemeni government’s retaking of the strait may now allow for oil to flow more easily through one of the world’s critical chokepoints, thus stemming the rising tide of prices.