Gas cylinder prices in Malta are in some instances up to 50 per cent cheaper than those sold in Italian cities and the UK, according to the Malta Resources Authority.

A comparative table published by the energy regulator shows that a 10kg LPG cylinder, which costs between €13 and €13.50 in Malta, sells for €25 in Rome, €18 in Sicily and €25.18 in the UK.

The table was published by the MRA to justify the maximum price for gas it established for January after it came under fire when the two gas providers set their prices more than €1 lower than the upper limit.

The decision by the dominant market player, Liquigas (which has Italian shareholding), to go below the maximum limit prompted critics to question whether the regulator had allowed the only company to sell gas before January to charge the highest amount possible.

However, in its defence, the regulator said Liquigas decided to “forego part of the approved mark-up” to remain competitive in the face of competition.

The MRA gave social partners a presentation on the mechanism it adopted to set the maximum gas price, which was necessary since the market was dominated by a large operator despite liberalisation.

According to the regulator, gas providers are allowed a mark-up of three per cent on the popular 12kg cylinders.

The largest portion of the price – some 67 per cent – was determined by the cost of raw material.

The distributors’ commission amounts to nine per cent of the price of a cylinder while bottling and storage charges account for 14 per cent of the cost.

The mechanism adopted by the MRA is based on full cost recovery and monthly adjustments in the price of gas only apply if and when the variation in the product cost is plus or minus two per cent over the previous month’s price.

Mapping out the daily international price movements of LPG in the Mediterranean showed that gas was at its highest levels since July 2008.

The regulator said Liquigas and Enemalta, where its gas is bottled, would be requested to submit a plan of how they were going to improve efficiency that would result in a yearly reduction of five per cent of eligible costs for 2011 and 2012.

However, part of the problem related to frequent price fluctuations is also linked to the LPG storage capacity on the island, which the regulator admitted was limited to a storage capacity ranging from three weeks in winter to six weeks in summer.

LPG gas prices in Italy

ksansone@timesofmalta.com