TIRANA, March 20 – An increase in fuel prices triggered by rising tax burden on oil traders has led to a decline in domestic oil consumption, an indicator hinting the transport sector is not doing well and domestic consumption remains sluggish despite the economy officially reported to have grown by about 4 percent in 2017.
The situation is also confirmed by INSTAT, the state-run statistical institute, which shows the volume of retail fuel sales dropped by an annual 5.2 percent in the final quarter of 2017, in the third quarterly shrink in a row following lower annual declines of 2 and 4 percent in last year’s second and third quarters of respectively.
The Association of Oil Traders says the situation is a result of sharp hike in licence fees that the country’s petrol stations have been facing starting this year, forcing them to reflect the higher tax burden on retail fuel prices, currently one of Europe’s highest despite Albania being one of Europe’s poorest countries.
“There has been a decline in consumption in the fuel market. Taxes affect the final consumer prices. Households have no money because their income and wages are not growing and they can’t afford the hike triggered by taxes,” Luigj Alija, the head of Albania’s Oil Traders Association, is quoted as saying by a local news portal.
In April 2017, the Albanian government increased fees on renewing licenses on petrol stations by 30-fold to 3 million lek (€22,276) for the municipality of Tirana and to 1 million lek (€7,425) for the other 60 municipalities after the Constitutional Court had earlier turned down higher licence fees.
The new license fees in force starting this year have led to average oil prices hitting 176 lek (€1.33), of which 110 lek (€0.83) or two-thirds include taxes.
Oil traders say they currently buy oil at $560-600 metric ton, $70 more compared to a year ago.
However, a considerable depreciation of the US dollar against Albania’s national currency has made oil imports much cheaper this year.
The U.S. dollar fell to 105.51 lek this week, down from about 126 lek a year ago, depreciating by an annual 16 percent.
Albania imported some 400,256 metric tons of fuel in 2017, about 20 percent less than in 2016 and a record low for the past eight years.
However, the lower imports were also a result of the reactivation of a local oil refinery that produced 156,000 metric tons of fuel from locally extracted crude oil in the first eleven months of 2017 before it went bankrupt in December 2017, leaving more than 1,000 workers jobless.
Albanians face one of Europe’s highest fuel prices, but paradoxically one of the continent’s lowest GDP per capita estimated at only 30 percent of the EU 28 average.
At €1.37/liter this week, Albania’s diesel prices were on par with France and considerably higher compared to Europe’s superpower Germany at €1.18/litre, says the Global Petrol Prices portal.
By contrast, fuel prices in some neighboring countries at a similar development stage to Albania are up to 30 percent lower. Fuel prices were at €0.93/liter in neighboring Macedonia and at €1.2/liter in Montenegro this week.
The extremely high petrol prices due to the high tax burden levied on them, makes possessing a car too costly for the average Albanian.
However, Albanians face one of the regions lowest annual fees and compulsory insurance rates on vehicles and dozens of thousands have shifted to cheaper vehicle liquefied natural gas to reduce costs.
Conversion from petrol running to liquid gas-powered systems costs an average of €500 in Albania and is estimated to reduce consumption costs up to 50 percent because of cheaper liquid gas prices.
