TIRANA, Feb. 13 – The tax burden on Albania’s oil prices is set to further increase in a new blow to Albanian consumers, already facing one of Europe’s highest oil prices, but one of the continent’s poorest income.
Proposed legal changes on emergency oil stocks and a new concession under way to inspect fuel and liquid gas measurement systems are expected to further increase costs for oil importers and lead to a hike in retail prices.
In a bid to approximate legislation as it hopes to launch long-awaited EU accession talks this year, the Albanian government has proposed setting up a state-run agency that will handle emergency oil stocks and apply fees on oil importers for minimum stocks of crude oil and petroleum products.
In line with EU legislation, the Albanian energy ministry has also proposed maintaining stocks of crude oil and petroleum products equal to at least 90 days of net imports or 61 days of consumption, whichever is higher, in emergency stocks to be used in the event of supply disruptions.
Currently, emergency stocks are handled by oil importers themselves based on 90 days of average sales, which in 2018 was at around 218,370 metric tons, according to the energy ministry.
However, the emergency stocks are often ignored, leading to allegations of abuse in cases of international oil price hikes being immediately reflected on the local market.
The Albanian government says the switch to a state-run service that will guarantee 90 days of net imports or 61 days of consumption in emergency stocks will be gradually made until the end of 2022 when oil operators will have to maintain oil stocks of 30 days of average sales, and the state-run agency handle the rest of stocks in exchange for a fee that will be applied on wholesale traders.
The state-run agency for emergency oil stocks will handle operating costs from the fees it collects, as well as operations in oil purchases, storage, and trade, with no financial effect for the state budget.
The fee rates are expected to be determined under another government decision.
The proposed legal changes that could undergo further review when submitted to Parliament amid expected reactions by a billion dollar industry of oil importers and traders also envisage tough penalties of up to 10 percent of annual turnover in case operators fail to meet new obligations.
Albania is a huge oil producer, but domestic oil production is mostly destined for exports in low value-added crude oil exports, at a time when a local refiner operating on outdated technology has been facing financial straits and changed hands several times following a failed privatization a decade ago.
The country meets most of its domestic needs through imports which in 2018 grew by a quarter to 501,800 metric tons due to a local refiner operating at reduced capacity.
New concession
The Albanian government is also planning to award a new concession in the oil sector that will apparently increase costs for oil traders.
The concession to inspect fuel and liquid gas measurement systems for the next 20 years switches to private hands a service currently carried out by the state-run Directorate of Metrology.
Noa Control, an Albanian company cooperating with Spain-based Applus testing, inspection and certification services, has received a 10 percentage point bonus for its unsolicited bid for the upcoming 20-year PPP, a proposal that dates back to December 2016 before getting the initial government okay in mid-2018.
A complaint filed by a Swiss company with Albania’s Public Procurement Commission, an appeals body whose decisions are corrective and can be challenged with the Administrative Court, over alleged tailor-made criteria, has been recently turned down and a new tender is expected to be held after initial public procurement scheduled for Oct. 18 was cancelled.
Fuel station pumps currently undergo technical controls on meeting quantity and safety standards twice a year by state inspectors of the General Directorate of Metrology, with annual costs for fuel operators estimated at 14,000 lek (€110)/pump in a service that generates more than €635,000 a year and is the main income for the state-run metrology service and their staff of 120.
That would be the second concessionaire in Albania’s multi-million dollar oil industry following the fuel marking concession run by Global Fluids International, a subsidiary of Canada-based Eurocontrol Technics Group, which in late 2013 started its 10-year national fuel marking and tracing contract with the Albanian government, charging 1 lek (€0.008)/liter.
Oil prices
Albania has one of Europe’s highest oil prices and poorest quality, with almost everything going unpunished despite a series of negative effects on the environment, pollution-related diseases and some 430,000 cars possessed by Albanians.
Albania’s oil prices were at €1.38/liter this week, making them one of Europe’s highest, despite the country’s GDP per capita at only a third of the EU average and around half of new EU member states.
A series of fixed-rate taxes including excise, circulation, and carbon taxes as well as VAT at 20 percent take the tax burden at 100 lek (€0.8)/liter under current prices, accounting for around 60 percent of the final price.
At €1.38/liter, Albania’s diesel prices are the Western Balkan’s highest, significantly higher compared to neighboring Macedonia’s €0.98/l and Montenegro’s €1.19/l and even more expensive compared to Germany, Europe’s leading economy, at €1.24/l, according to US-based the Global Petrol Prices portal.
The last time the government directly increased taxes on fuel was in 2014-15 when the circulation tax levied on fuel was risen by a total of 20 lek (€0.16)/l. Fuel traders say high prices also reflect a sharp hike in license fees since 2017 that has almost eliminated petrol stations not linked to major traders.
The fuel trading market, one of the country’s biggest industries, is represented by more than 1,000 fuel stations with an annual turnover of more than €1 billion, half of which goes in taxes that consumers pay.
The market is controlled by three major companies that are key importers, wholesale suppliers and retail traders, of which one has a market share of around 50 percent.
Brent crude oil prices currently stand at $63 a barrel, having dropped from a three and a half-year high of $80 a barrel last October, with a negative impact on the country’s oil industry and new drilling plans.
