Apart from deteriorating the households’ budget in this time of crisis, rising fuel prices are having a negative impact on several industries such as transport, industrial production, agriculture, construction and fishing considerably raising costs at a time when demand remains low
TIRANA, March 7 – With fuel prices at historical record high of almost 200 Lek (Euro 1.4), another threat is posed to the country’s economy this year, which international financial institutions such as IMF say will keep Albania on the brink of recession. As domestic consumption fails to recover, the country’s industries are facing higher production costs and a drop in demand which is leading to lower consumer prices. The Consumer Price Index last February rose by a mere 0.6 percent, an unusual low rate unseen during the past decade.
However, oil prices continued their rising trend driven by higher international stock market prices and rising tax burden.
Apart from deteriorating the households’ budget in this time of crisis, rising fuel prices are having a negative impact on several industries such as transport, industrial production, agriculture, construction and fishing considerably raising costs at a time when demand remains low. Both diesel and petrol prices stand at above 190 lek, with petrol sold at 199 lek in some Tirana petrol stations.
The staggering oil prices are making owning a car a burden for average Albanians, which is also revealed by less traffic. Under a new law, in force since Sept. 2011, owners of old cars have faced a sharp increase in annual taxes, and now cars produced in the early 90s or before are rarely seen on the roads.
Finance Ministry data show fuel imports for the first 11 months of 2011 were at around 388,492 tonnes, down 47,000 tonnes or 11 percent compared to the same period in 2010 and 5,692 tonnes or 1.5 percent less compared to the same period in 2009.
The increase in fuel prices registered during the first months of this year is more a reflection of rising oil prices in international markets and the depreciation of the Albanian Lek against the US dollar rather the an additional 2 lek/litre tax car owners are paying starting from Jan. 1 2012, says the Business Albania Association.
As of Jan. 1 this year, Albanian car owners are being taxed 7 lek/litre of oil compared to 5 lek from Sept. 2011 to Dec. 2011 when car customs taxes, circulation and registration taxes were lifted as failed to be replaced by a new fixed tax based on oil consumption.
Business Albania which also represents the Association of Hydrocarbons has dismissed price abuse claims saying the real price increase was a result of oil prices in international markets rising by 50 to 60 USD tonnes. According to experts of this association stock exchange prices and domestic tax obligations account for 98 percent of the final oil prices. Association officials also complain the port storage taxes are among the highest in the region including other tax obligation such as VAT.
According to energjia.al energy portal, diesel prices in Albania this week were at an average of average of 183 lek/l, petrol prices at 194 lek/l while LPG prices at 95 lek/l, registering an increase of 20 to 30 lek/l compared to the same period last year.
The high tax burden, with excise tax currently at 37 lek/litre, VAT at 20 percent, the newly increased carbon tax, port taxes and transport expenditure, all contribute to the final high price of oil.
The Tirana Chamber of Commerce and Industry has earlier called on government to review the excise tax rates on fuel, a suggestion which was rejected by Finance Ministry officials.
The current annual traffic and registration taxes car owners pay have been replaced by a new formula similar to that of import in customs procedures. The new law excludes cars produced during the past three years from their annual taxes but applies a progressive coefficient of 0.18 for cars produced in 2009 and a +0.01 coefficient for each year before. The new formula increases taxes for cars older than 10 years and keeps annual taxes for newer cars at the same or slightly lower levels.
The new tax varies depending on the car’s horsepower, its age, and the kind of fuel it uses. It is calculated by multiplying the car’s engine (cc), with a progressive coefficient starting at 0.18 and a fixed tariff of 25 Lek for diesel cars and 20 lek for petrol ones.
IMF’s warning
The International Monetary Fund has recently flagged higher oil prices as a rising threat to the global economy, urging policymakers to keep a close eye on western tensions with Iran, which is facing punitive measures against its crude supplies. Looming U.S. sanctions on Iran’s oil buyers, as well as an impending European Union oil embargo, have forced countries to cut back on purchases from the world’s fifth-largest exporter of crude, pushing up the price of the commodity.
“A new risk on the horizon, or maybe not on the horizon, maybe right in front of us, is high oil prices,” David Lipton, First Deputy Managing Director of the International Monetary Fund, said in a presentation at the G20 gathering.
The fear of tightening supplies, exacerbated by a threat from Tehran to close the Strait of Hormuz – the main Gulf oil shipping lane – have lifted prices to new highs, Reuters reports.
Oil prices retreated this week as data showing a shrinking euro zone economy fueled fears of curbed demand for petroleum, while news that major powers accepted Iran’s offer for more talks on its nuclear program eased concerns about supply disruptions.
Brent crude fell $1.50 to $122.30 a barrel.
