Filenews 24 June 2022 - by Eleftheria Paizanos
At a time when the Executive and Legislative Powers are looking for ways to reduce the energy costs of consumers and a debate is underway in parliament to simplify the procedure for imposing a cap on the sale price of fuel, the Consumer Protection Service of the Ministry of Energy gave to the House the requested details on the new formula for controlling and evaluating fuel prices.
According to a letter from the Director of the Consumer Protection Service, Konstantinos Karageorgis, the Ministry of Energy proceeded to the purchase of services for the submission of a new methodology and a computerized framework for the evaluation of prices, due to the significant changes that occurred in the marketing and operation sector of oil import companies (i.e. the relocation of liquid fuel installations from Larnaca to Vassilikos, use of biofuel, etc.). The company that undertook the completion of the new framework is G.D Positive. The new system was handed over to the Ministry last February and lately test entries have been made. According to the Ministry, this is a modern and flexible system, in which innovative elements are introduced. As pointed out, the costing of each company's products is based on the policy that follows, automation has been increased and aggregated tables are produced for analysis and comparisons.
Meanwhile, another difference between the new framework and the existing one is that it simulates the transactions of companies (every import/purchase, transfers to petrol stations, purchases and sales between companies, revaluations and quantities) for the products that will be monitored, i.e. 95-octane petrol and diesel and heating.
The current monitoring framework
The current price monitoring framework is different and was based on Grant Thomton's report. In particular, the Consumer Protection Service updates the calculations of direct and indirect costs and profits of companies. In addition, it determines the acceptable exclusions between the intended and actual wholesale selling price, it also collects and records information regarding cargoes and oil stocks.
The Service, through the costing software of the existing framework, prepares a forecast of the wholesale price that is expected to result from each fuel load. At the same time, it monitors the international price indices of petroleum products and correlates their change with the change of prices in Cyprus.
The time of the price change
According to the replies of the competent service of the Ministry of Energy, six factors determine the prices of fuels: the weighted average stock price, the port and customs clearance costs, the cost of additives (biofuels for diesel), consumption taxes, charges from KODAP, as well as the expenses and profit of a company per litre.
However, the Ministry of Energy cannot determine the time when international fuel prices rise, prices in Cyprus also increase. As noted, the retail prices of petroleum products in Cyprus are influenced by various factors, such as the import price of the products, the exchange rate of the dollar against the euro, the reserves held by the companies at the time of import of the fuel and the taxes imposed by the state. He also says that the University of Cyprus and the Commission for the Protection of Competition proceeded with studies, investigating whether the prices of petroleum products rise rapidly in times of increases in import costs and decrease slowly in times of reductions in import costs, but without proving this impression.
