Fuel hedging has left Maltese motorists paying the highest price for petrol and diesel in Europe as the international price of oil continues to fall.

An analysis of fuel prices carried out by The Sunday Times of Malta showed that in November motorists in Malta paid the highest price for fuel across the EU.

The comparative exercise took into account the price of fuel and excluded tax. Figures were obtained from the European Commission’s weekly oil bulletin.

The price of petrol was locked at €1.44 per litre (including taxes) in May until the end of the year after Prime Minister Joseph Muscat announced a two cent cut during a press conference at Auberge de Castille. Diesel was also locked at €1.36 per litre.

But while fuel hedging at the time may have spared motorists increases in fuel prices for three successive months, it backfired after July when international oil prices, including oil products, started to drop.

Malta’s petrol price on November 3 (the latest EU oil bulletin) stood at 71c per litre (excluding taxes), almost eight per cent higher than Denmark, which came next at 66c per litre.

Figures show that while fuel hedging ensured price stability, petrol progressively became costlier after July when compared to what European motorists paid.

71

- cents per litre (excluding taxes), almost eight per cent higher than second-placed Denmark

While fuel hedging ensured the price of petrol in Malta was the 11th highest in July, by August it became the fifth highest as the international oil market started to slide. In September, petrol in Malta was the third highest in the EU and a month later motorists were paying the second highest price for the fuel.

Diesel also followed the same pattern with the latest oil bulletin showing that motorists paid 73c per litre (excluding taxes), tipping Denmark for the top spot.

The downward movement in international fuel prices highlights the downside of hedging. This is a financial instrument through which a buyer locks the price and possibly the exchange rate at which he will buy fuel.

It ensures stability over the long term but cannot guarantee a lower price.

While Enemalta’s last hedge shielded motorists from increasing fuel prices at the time, it penalised them heavily in the four months that followed as oil became cheaper.

The Opposition has criticised the government for freezing fuel prices at their current level until the end of the year.

Last month it called on the government to “immediately” lower fuel prices to reflect the drop in oil prices.

The Nationalist Party had argued that the price of oil was in the same level of September 2010, when its market price was in the region of $80 a barrel.

Back then, petrol was 24c per litre cheaper and diesel cost 30c less. The government had described the PN’s argument as “technically incorrect” because it only considered the price at one particular moment in time while ignoring the lower prices in previous months.

Oil cost for past three months

Prices are in euros per 1,000 litres. Source: European Commission

kurt.sansone@timesofmalta.com