High prices at the pump persist in Albania despite global fall, sparking debate over lack of competition and high taxes
TIRANA, Jan. 22 – A fierce debate over lack of competition and the rising tax burden on fuel is taking place in Albania, as global fuel prices have more than halved since their peak in June 2014, but the price at the pump in Albania as fallen only slightly.
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, according to Erjon Braçe, a member of parliament from the ruling Socialist-led coalition and head of the parliamentary economic committee.
Brace argues fuel prices in Albania are at least Lek 30 to 40 (€0.21 to 0.28) higher than they should normally be.
The opposition accuses the government for turning fuel into a cash cow, loading it with heavy taxes and allowing companies that dominate the market to keep prices higher than they need to be.
The government has been urged to restructure the country’s oil trading market, which is largely dominated by three big oil importers, which own over 70 percent of the market and almost the entire gasoline market.
Calls for government intervention
Braçe, the Socialist Party MP, called on state institutions to intervene by changing laws and ordinances and control the quality of fuel in every pump to free the market so that it fully reflects the sharp cut in global prices.
In fact, the Albanian Competition Authority has already launched an inquiry into the market which is suspected to operate under conditions of oligopoly.
“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,” Braçe said.
Citing data from the Durres customs directorate, he added that diesel prices should be at least Lek 30 cheaper considering the import price of around Lek 48 per litre and taxes at around Lek 90. The difference for petrol prices is Lek 40.
Traders argue the Lek 30 difference with operating expenditure, advertisement and local government taxes and the profit rates.
However, the Hydrocarbon Traders Association, representing Albania’s fuel importers, argues the situation is not a result of lack of competition by the increased tax burden.
The association says fuel prices in Albania are at least Lek 42 higher compared to neighboring Kosovo, Macedonia and Montenegro because of extra taxes such as the circulation tax at 27 lek/litre, the carbon tax at 3 lek/litre, fuel marking at 1 lek/litre and VAT at 20 percent compared to 16 to 19 percent in the neighboring countries.
“We would like to clarify that if these three taxes and VAT would be at the same rate to the region, fuel prices in Albania would be 7 lek/litre cheaper compared to the region,” the association said in a statement.
Reacting to competition concerns, the association claims the market is engaged in fierce competition and there is no legal barrier for the entrance of new operators.
Fuel import rose to 344,000 tons in the first three quarters of 2014, up 10 percent compared to the same period last year, according to data published by the customs administration.
Data shows Albania imported around 460,000 tons of fuel in 2013, up 6.5 percent compared to 2012 and up only 0.5 percent compared to 2011, but down 5 percent compared to the peak imports of 484,000 tons in 2010.
With an annual turnover of €800-900 million, the fuel market is one of the biggest industries in the country and has a direct impact on all sectors of the economy and citizen’s welfare. Data from fuels associations show some 160 companies operate in the wholesale oil and liquid gas market and another 1,000 in the retail market, making the market appear fully liberalized. But critics argue that the market is dominated at the top by just three main suppliers.
Opposition urges protests
The main opposition Democratic Party has called on Albanians to hold a five-minute protest on Jan. 26 against the delay of the reduction of the oil price at the fuel stations.
The Democrats urged Albanians to stop their cars for five minutes next Monday at 11 a.m. accusing the government of favoring fuel suppliers and of setting high taxes on imported fuel.
Oil prices in fuel stations in Albania remain high for consumers, as local traders and distributors refuse to lower prices to a regional normal average despite the worldwide huge price fall since last summer.
A liter of diesel costs up to Lek 167 (about €1.20).
The government has been urged to restructure the country’s oil trading market, which is largely dominated by three big oil importers, which own over 70 percent of the market and almost the entire gasoline market.
The opposition accuses the government of setting a high tax burden on fuel, going up to 100 leks per liter.
Fuel prices decline globally far more than locally
Fuel prices in Albania continue remaining at their December levels despite a Lek 12 (€0.084) hike in circulation tax which has entered into effect since January this year.
Experts say the situation is a result of global fuel prices continuing their decline and the reserves oil companies have from their late 2014 imports.
The price of Brent crude oil fell below $50 a barrel this week for the first time since May 2009.
Experts expect the price of oil to fall further as North American shale producers continue to supply increasing quantities of oil and gas, and the oil-producing group OPEC resists calls for cuts in production to support prices.
However, the sharp drop in international markets has been poorly passed on to consumers as international oil prices have hit a record low of below $50 a barrel, down around 56 percent since their peak in mid-June 2014,
Oil prices in Albania stand at an average of 165 lek/litre (€1.19), down only 14 percent compared to last June when fuel prices embarked on downward trend after a slow-down in manufacturing in China and Europe and increasing supply from North America.
The depreciation of the Albanian national currency against the U.S. dollar which since May 2014 has lost around 10 percent has also had an impact.
Data published by GlobalPetrolPrices.com this week show Albania’s diesel prices stood at €1.21/litre, higher than Macedonia’s €0.88/litre, Montenegro’s €1.03/litre and Serbia’s €1.17.
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 (€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 — and 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.
Albania’s oil products have emerged as one of the key exports, mainly due to huge investments by Canada-based Bankers Petroleum which since 2004 operates and has full rights to develop the Patos-Marinza and Kuçova heavy oilfields under a 25-year concession contract with the Albanian government.
However, due to the poor quality of Albania’s crude oil and lack of processing industry, Albania meets almost all of its oil needs with imports. The Albanian oil is exported and mainly processed as bitumen, which is used in road reconstruction.
