Ministry explains price fluctuation

When asked last week to clarify how much the price of fuel oil and gasoil had fluctuated, Enemalta re-directed the questions to the Infrastructure Ministry.

In its reply, the ministry denied there was a 15 per cent fluctuation "from the base", insisting the tariffs were worked out on fuel prices that were "much lower" than the October average.

The ministry said the tariffs were published on December 4 and are based on the fuel oil prices of October, less €30 million, which was subsequently increased to €36 million.

"This means that the assumption that you should use October 2008 prices as a basis for comparison is completely wrong," a spokesman said.

The ministry said the new benchmark for 2009 is an oil bill of €216.3 million and the position will be re-assessed at the end of March.

Still, the new benchmark oil bill quoted by the ministry is much higher than Enemalta's total fuel bill in 2006 and 2007 respectively, when the price of oil was much higher than it is today.

The ministry defended this point saying: "I should point out that the bills now being issued are far, far lower than what consumers would have paid if the surcharge system was retained".

He insisted that on October 1 consumers should have started paying bills with a surcharge of 190 per cent, reflecting the bill for fuel oil purchased between July and September when oil hit an all-time record.

"It seems that everyone has conveniently forgotten that the Maltese consumer has never been charged for this period of high prices and the shortfall incurred is being absorbed by either the government or Enemalta as an additional subsidy to the already high subsidy that the government gave the corporation last year," the spokesman said.

On Sunday, the Prime Minister said the price for water and electricity would eventually go down to reflect the reduced price of refined oil. He did not say when and by how much but pointed out there was a time lag between the drop in price of crude oil and that of refined oil.

"If God wills, even because the price of oil has gone down, the time will come when the tariffs will be reduced," Dr Gonzi said.

Factbox

Spot oil prices in January

Low Sulphur Fuel Oil 1%
$249 per metric tonne = €193.34

Gasoil
$441.25 per metric tonne = €342.61

All prices are CIF Mediterranean as quoted by Platts on January 21. Original prices in dollar per metric tonne have been converted to euro per metric tonne at the euro/dollar exchange rate of 1.2879 quoted by Platts on the day.

Annual fuel cost as at January 21, 2009

Fuel oil consumption = 568,000 metric tonne

Total annual cost = €109,817,120

Gasoil consumption = 75,000 metric tonne

Total annual cost = €25,695,750

Total fuel cost as at January 21 = €135,512,870

Annual consumption figures are taken from the KPMG report commissioned by Enemalta, which were reconfirmed by the Deloitte report commissioned by the Malta Resources Authority.

Annual fuel cost as at October 24, 2008

Total annual fuel cost to Enemalta = €223,000,000

Total annual fuel cost is taken from the KPMG report commissioned by Enemalta for the period October 1 to 24, 2008. It also includes an extra reduction of €30 million.

Oil price difference

Fuel cost according to KPMG report in October = €223 million

Fuel cost according to spot market price in January = €135.5 million

Difference between October and January = -€87.5 million or -39%

The figures established by KPMG's second report in October were used as the basis for computing the new utility tariffs. Minister Austin Gatt had announced that tariffs would be revised every six months or when the price of oil varies by 15 per cent.

ksansone@timesofmalta.com