Smelling the (s)cents of fuels

During the energy price hikes in mid-2008, Malta hedged its fuel requirements by purchasing fuel for several months at prices prevalent in late April 2008. Spot prices for diesel and conventional gasoline in the last two weeks of April 2008 averaged $3.5 and $2.89 per US gallon respectively (€0.586 and €0.484 per litre). The consequent consumer prices at the local pumps from July to November 2008 were €1.206 (diesel) and €1.197 (petrol).

Spot prices for diesel and petrol last month respectively averaged $3.037 and $3.027 per gallon or €0.559 and €0.557 per litre at the prevailing exchange rate.

A litre of diesel last month would have cost Enemalta around €0.027 more than in April 2008, while petrol was €0.073 more expensive.

The current pump prices of €1.30 for diesel and €1.41 for petrol are supposedly based on a May 2011 ‘shipment’, but never mind the two- to three-month delivery times after contract.

To compare like with like, one needs to take into consideration the November 2010 three-cent increase in excise tax and the 0.8 cents going to the pump stations for their refurbishment – around four cents in all – not imposed in 2008.

Based on April 2008 pump prices, current prices should be €1.278 for diesel (currently €1.32) and that for petrol €1.323 (currently €1.39).

Though the current price of diesel is more or less acceptable, by no stretch of the imagination can one justify the current price of petrol by quoting the market.

With eight cents per litre above the postulated ‘realistic’ June price for petrol, Enemalta could be pocketing an extra €685,000 while the government nets an extra €123,000 in ‘surplus’ VAT during the current month.

This may be just the tip of the iceberg, a strategy implemented to mitigate Enemalta’s debts by fleecing motorists.

The reasonable reduction in the price of diesel and the disproportionate and unjustified rise in that of petrol cannot be coincidental to the impending start of the new bus service in a month’s time.

Lower diesel prices would stave off claims by Arriva to raise its fares already made public while at the same time ensuring the public transport service will be competitive with the costs of driving to your destination with a petrol-driven motor car of medium size and age. €1.50 of petrol (the price of a day ticket) would give you about 9.5 kilometres in a 15-year-old petrol-driven car.

European governments are obliged to impose a minimum excise tax on fuel. They could raise this excise tax to whatever level above the minimum permissible.

While the November 2010 €0.03 hike in excise tax (plus VAT) was met with disdain by the consumer and a proportionally weighted political backlash, inflating petrol prices clouded by dry statements like “reflecting the prices of the latest shipments of imported fuel”, proves to have little political backlash and in any case of short duration.

The past excesses of water and electricity subsidies required for political strategies dictating the need to win popularity and keep the opposition at bay have led to the massive debts accumulated by our power provider. What better way is there to make consumers pay these debts without knowing?

Taxing energy is an incentive to reduce waste and increase efficiency. In this case however, cross-subsidisations are being institutionalised. Motorists minding their own business are made to pay for unsustainable political strategies of the past. This is unacceptable. It goes squarely against the polluter-pays principle.