By Ervin Lisaku
TIRANA, Feb. 16 – Albania’s competition watchdog says it has failed to find evidence of an alleged oligopoly in the country’s fuel market, the overwhelming majority of which relies on imports carried out by only three to four companies.
“No evidence was found to prove banned deals or abuse of collective dominance among the probed companies,” said the Competition Authority after a thorough investigation into the fuel market for the January 2010 – April 2014 period which ended up with only several recommendations but no fines to the market operators.
“Competition in the import market and the wholesale trade of fuel is not efficient enough because of the market structures and the legal and by-law regulation of this market,” said the Authority.
The probe into the domestic production, import and wholesale trade of fuel unveiled the fact that there exist excess stages in the market structure which don’t justify the added value in the distribution chain starting with imports, special customs zones, wholesale and retail trade before reaching the end consumer, causing an artificial increase in costs and a relatively low price elasticity.
“The high level of market concentration and the tendency for an increase in concentration in the import market requires structural market improvements and the interweaving of instruments beyond those by the Competition Authority, to prevent abuse and stop companies with a considerable market power to apply abusive practices which damage consumers,” says the competition watchdog.
The Authority has recommended the Albanian government to make legal changes allowing wholesale companies to also carry out retail sales directly in order to eliminate the extra stages in the trade chain and reduce unnecessary costs. The hydrocarbons law envisages that wholesale companies have to establish limited liabilities enterprises in order to operate in the retail market, increasing costs for consumers.
“Wholesale companies should also preserve the identity of the product and compete through their respective logos in retail sale points to further promote competition.”
Another recommendation by the Competition Authority involves the establishment of a transparency unit on fuel prices based on the German model which would require a legal basis and the necessary administrative infrastructure. The new changes would force companies operating in the production, import and wholesale trade of fuel to notify the transparency unit and the Competition Authority in real time for every change in the wholesale price.
The Authority also requests the assessment of the implementation of the Vlora 1 concession deal after identifying that one of the wholesale companies operating in the southern port is a shareholder in PIR group which holds 94% of shares in La Petrolifera Italo-Albanese consortium in violation to the concession contract.
Speaking in a TV interview after the release of the report, the head of the Competition Authority Lindita Lati said the watchdog’s main goal was to analyze the characteristics of the market and provide suggestions to improve its efficiency. She argued lack of fines with the fact that the Competition Authority had historically collected only around a quarter of the fines it has imposed due to court appeals.
The watchdog also suggests the establishment of necessary instruments to control the frequent market entry and exit of enterprises operating in the wholesale fuel market during a single financial year, saying that this situation produces unfair competition.
Highly concentrated market
The ”three firm” concentration ratio, known as CR3, rose to 86.7 percent in 2013 for the import of diesel and was at 98.7 percent for petrol.
Data shows Durres-based Kastrati which operate as an importer, wholesale and retail trader increased its import share to 46.3 percent in 2013, up from 38 percent in 2010. Second ranks Tirana-based Everest Oil with 23.8 percent of diesel imports and 38.4 percent of petrol imports followed by Kruja-based Europetrol with 16.6 percent of diesel market and 23.5 percent of the petrol market.
Imports are carried out by sea in the Romano Port consortium in Durres and “La Petrolifera Italo-Albanese in Vlora, southern Albania.
ARMO, the Albanian-run refiner saw its market share drop to 4.1 percent in 2013 down from 17.5 percent of the domestic market in 2011.
Although a huge oil producer, Albania exports the majority of its domestic crude oil production due to poor quality.
Fuel prices remain high
With global fuel prices having more than halved since their peak level June 2014, but only slightly falling in Albania, a fierce debate has broke out in Albania where the situation is blamed on lack of competition and the rising tax burden on fuel.
The high fuel prices in Albania are not only a result of taxation, but also lack of competition and abuses in a market controlled by three operators, Erjon Braçe, the head of the parliamentary economy committee has warned.
“The market control by only three operators and an ordinance turning retail companies into agents of wholesale companies which determine prices and the poor quality of fuel has seriously endangered market competition,” said Braçe.
However, the Association of Hydrocarbons, representing Albania’s fuel importers, argues the situation is not a result of lack of competition by the increased tax burden estimated at around 100 lek (Euro 0.7) per litre.
Fuel prices have dropped by 20 percent to an average of 160 lek/litre (Euro 1.12) in the past few months at a time when international oil prices have almost halved compared to their peak level in mid-2014.
Data published by GlobalPetrolPrices.com this week show Albania’s diesel prices slightly rose to Euro 1.15/litre, higher than Macedonia’s Euro 0.83/litre, Montenegro’s Euro 1.02/litre and but slightly lower than Serbia’s 1.17 euros.
Starting January 2015, the circulation tax, currently at 17 lek/ litre, has increased by another 10 lek (12 lek VAT included) taking it to 27 lek litre (Euro 0.19), not to mention the excise tax at 37 lek/litre, the carbon tax at 1.5 lek/litre on petrol and at 3 lek/litre on diesel, VAT at 20 percent, and other customs duties which make fuel prices in Albania among the highest in the region and Europe despite the country having one of Europe’s lowest GDP per capita.
The finance ministry has recently lifted an ordinance changing the way VAT is applied on oil prices in an effort to increase competition among retail fuel stations. Under the new ordinance replacing a previous one issued in 2008, the 20 percent VAT on fuel will be applied only on wholesale oil companies, slightly easing the tax burden to retail points.
However, experts remain skeptical such a measure will have a real impact on oil prices in Albania, which are among the highest in Europe due to the high tax burden applied on them.
