Filenews 19 June 2022 - by Panicos Charalambous*
With fuel and electricity prices having reached record highs and forecasts being ominous, much has been heard in recent times as to who is to blame, how much and what and whether this imported inflation could be dealt with in a better and more efficient way.
It would, of course, be naïve to argue that Cyprus could be left unaffected by the race, internationally, of oil prices - its derivatives and of natural gas. Our country is part of the global economy, an open market and for the time being without its own significant energy resources.
Apart, however, from the above general introduction, in Cyprus have been recorded since the foundation of the Republic and especially after 1974, tragic mistakes that have brought the country today trapped in an energy labyrinth, from which I personally do not see a way out soon. More new deadlocks I see.
The energy issue
In the energy issue I would include four factors, which are responsible for the situation in which we find ourselves today. In fact, everyone has a common denominator: on the one hand, the absence of a development plan and medium to long-term planning and, on the other hand, the service of private and peculiar interests, at the expense of the public interest. In the peculiar interests I would put, among others, the partisan, the trade union and the local, while in the relevant collateral factors and obsessions there are four factors - modules that are responsible and related to our energy entrapment are, in my opinion, the following:
● Urban anarchism. The development of land and real estate took place and unfortunately continues to take place today without general and special urban planning. The last great example is the towers that sprouted as mushrooms in all cities, without the necessary study of the effects having been carried out. And they may have brought in revenues and strengthened the Cypriot economy at a difficult time, but I am very afraid that, when the time comes to face the consequences, the cost will ultimately be higher than the benefit. In general, our country developed anarchically because, primarily, what counted and continues to count today to a significant extent was the satisfaction of private and peculiar interests (especially after the Turkish invasion in 1974), resulting in two important problems:
Firstly, it is almost impossible for public transport to function satisfactorily, because full coverage of free areas in such a way as to offer a decent public transport service is impossible and certainly unprofitable. The building development took place mainly in width, often in isolation and without following a plan that would take into account all relevant factors, including the possibility of developing sustainable public transport. Even the state itself did not meet its housing needs on the basis of a similar design. No decentralisation or otherwise, no concentration of basic services in the same area, which would be easily accessible through public transport.
Secondly, since the establishment of the Republic there has never been a plan so that the construction of houses, commercial and industrial buildings will be adapted to the climatic conditions of Cyprus. And the most glaring - tragic - example are the buildings of the state. Take, for example, the buildings of the Ministries of Foreign Affairs and Finance, most municipal buildings and the vast majority of school buildings. Just make a simple comparison as to how and with what materials the English built several public buildings during the British rule, including public buildings and schools.
● Cars, the alaloum. Here and if the state failed miserably. In Cyprus, we have introduced all sorts of cars without the state having drawn up a plan in order to have goals served by this design. In the absence of a policy (mainly due to expediency that often concerned the service of private interests) Cyprus is today a country in which perhaps the most energy-intensive cars in Europe are circulating in proportion to the fleet. It is a country with perhaps the most agricultural cars (double cabs), which are actually used as passenger cars (saloons) and a country whose roads have been flooded with cars imported second-hand from abroad. As a result, in recent years, while Europe is following a plan to reduce diesel vehicles, Cyprus has been inundated with tens of thousands of used diesel cars.
The state over the years has never designed a comprehensive policy in order to use as few energy-intensive cars as possible in the country and to have a fleet of relatively young age.
● The fuel mess; the other major scourge of this country is fuel. Here though things are glaring. In the fuel sector, in my view, the following have been recorded:
- Firstly, the right decision of the Makarios Government to establish in Cyprus, in cooperation with the oil companies, the Cyprus Refinery. This was done in 1965, but what did not happen afterwards, that is, a few years later, was the amendment of the original agreement that guaranteed a net profit of 10% to the companies. The same formula was followed, until the closure of the refinery.
- Secondly, the closure of the refinery in 2004 took place without taking measures that would ensure imports of refined products at prices similar to those of the refinery. During the operation of the refinery, oil was imported for refining, in large quantities, thus ensuring better prices and lower fares. Today, each company imports its own refined products, in very small quantities, with small ships and at higher costs, both for products and for fares. Storage facilities also contribute to the increased costs, where central planning was not followed, resulting in more capital being invested than was required, with this cost being passed on to the final fuel prices.
- Thirdly, the decision of the Republic of Cyprus not to seek the guarantee by the European Union of a special tax regime for fuel in Cyprus for a time horizon of at least 25-30 years within which it would implement a medium-term plan for the renewal of the Cypriot car fleet and a more integrated public transport plan, which would also involve urban redesign, such as, for example, high-level residential development in order to make the introduction of a decent public transport system more feasible in terms of urban planning. In this context, I would also include the digitisation of several public sector services so that the citizen does not have to visit government offices for the obvious reasons.
● Electricity - electric shocks. Add to the above the fact that, despite any plans from time to time, the Electricity Authority of Cyprus (EAC) was not allowed and was not given the opportunity to produce electricity using other forms of fuel, except oil. Note also that governments promised that no later than 2014 (the date is correct) Cyprus would import natural gas, which EAC would use to produce cheaper and cleaner electricity...
Incompetence of political leaders and public service
Although several more data could be recorded to show why today the citizen pays dearly for energy in Cyprus, the tragedy, in my opinion, is that we have reached today, that is, to be dependent on the private car, to have energy-intensive buildings and to produce energy at the highest cost, due to the incompetence of the respective political leaders and governments, the inability of the wider public service to guide political leaders as it stands its duty and, above all, the timeless service of private and peculiar interests.
Numbers always tell the truth
I shall now quote a few figures in order to understand the consequences of the absence of an integrated policy in the field of energy.
Cars
Cyprus is the third country in Europe in terms of the ratio of passenger vehicles per inhabitant. According to Eurostat data, reported in 2019, for every 1000 inhabitants, 645 passenger cars were allocated to Cyprus. In first place is Luxembourg with 681, followed by Italy with 663.
In Cyprus, in 2019 only 4.7% of passenger cars were less than two years old, compared to 28.8% in Ireland, 23.7% in Luxembourg and 22.9% in Belgium.
The number of licensed vehicles in Cyprus in 2020 amounted to 759,268, of which 555,271 were private saloons.
According to a recent statement by a police spokesman, 80 km of the two main entrances of Nicosia and Limassol are used daily by . . . cars!
Fuel
Fuel prices, based on the consumer price index, increased in December 2021 compared to December 2020 by 27.53%, while in May 2022 compared to the same month of 2021 the increase stood at 37%. In the four months of January - April 2022, 101,678 tons of unleaded gasoline and 22,928 tons of diesel were supplied by petrol stations. For the whole of 2021, 300,817 tons of unleaded petrol and 276,579 tons of diesel were made available from service stations.
Based on the latest census, the population in the state-controlled areas of Cyprus as of October 1, 2021 amounted to 918,100, of which 193,300 were non-Cypriots. The percentage of people aged 15-64 was 67.4% (618,800). That is, for 2021, there was approximately one ton of motor fuel consumption per inhabitant aged 15-64.
I would remind you that today the consumer pays for every litre of petrol and diesel 35.9 cents plus 19% VAT, that is, a total of 42.71 cents, because there is a special reduction in excise duty of 7 cents per litre, a total of 8.3 cents including VAT.
According to data submitted by the Ministry of Finance to the Parliament, in 2021 the state collected €212.8 million from the VAT levy on fuel.
According to a report by the Hellenic Energy Economy Company, with reference year 2018, revenues from excise duties on gasoline, oil, natural gas and electricity in Cyprus amounted to 2.2%, as a percentage of GDP, compared to the EU average of 1.9%.
Electric current
With electricity prices having risen to around 40% (for now) and burning consumers, the effects of increased energy costs are still not entirely apparent.
Production in Cyprus is largely based on electricity, which is why it is expected that the increased costs will be transferred to the products and services offered. According to official data, the total electricity consumption in 2018 corresponded to 4,572,478 mm kWh, of which 1,622,544 mm kWh related to domestic consumption, 1,816,134 mm. kWh commercial, the 883,962 mm kWh industrial and 154,878 mm kWh rural. That is, around 65% of the consumption was related to the production process.
Add to the mistakes that have been made that have prevented the EAC from using fuel other than oil, the purchase of pollutants, which the Authority is obliged to make in order to cover the problem created by the use of more polluting fuel. According to the data, EAC paid €74.7 million for the purchase of greenhouse gas emission allowances. in 2020, €72.9 million in 2021 and has budgeted an amount of €183.3 million for 2022.
* Journalist
