Petrol prices up

Latest figures show that the cost of a tank of petrol or diesel increased soon after price liberalisation came into effect on January 1 and experts predict that there will be further increases throughout the year.

The new legislation makes it possible for pumps to vary their prices day by day and from region to region. Several outlets have already taken advantage of the liberalisation – at BP, Repsol and Shell outposts a litre of petrol has already risen by one cent per litre. Other pumps, such as those belonging to Galp, are still charging last year’s prices.

But José Horta from the Association of Petrol Companies (APETRO) believes that there will be more frequent price variations as the old uniformity of prices is gradually abandoned. He hopes that the deregulated market will follow the Spanish model, where petrol is considerably cheaper than in Portugal – a positive move for Portuguese consumers.

Horta claims that some pumps, especially those owned by big outlets, as well as the smallest stations such as Cipol, which have small distribution networks and are trying to win new clients, will probably lower prices to levels beneath those established by the government.

However experts predict that, at least for the foreseeable future, prices are unlikely to fall at the majority of the country’s petrol pumps. Distributors and vendors can now alter prices whenever they want, depending on factors like the current price of a barrel of petrol, the profit margin at the pumps and the tax rate on petrol products. And the current economic situation is not particularly conducive to lower prices, bearing in mind the recent increase on ISP (tax on petrol products) of around two per cent on petrol and a soon to be announced increase on diesel.

In addition, the new Eco Tax will also come into force in February, adding another cent onto the price of each litre of petrol sold and a quarter of a cent onto diesel. Add these factors to the international economic uncertainty – particularly the situation in Iraq – and there are innumerable uncertainties about the future price of crude oil. Economists claims that if the situation in Iraq is stabilised then the price of crude oil is unlikely to rise, but if the country is thrown into further turmoil, then the price of a barrel of crude could rise sharply.

There is one bright mitigating factor- the strong performance of the euro against the dollar – but Economy Minister Carlos Tavares has confirmed that, at least in the short term, “prices are definitely rising”.

Tavares went on to defend liberalisation by saying: “This is not necessarily as a consequence of price liberalisation or the increase in tax on petrol products or the new Eco Tax.” In fact he believes that price liberalisation will lead to positive repercussions. “It will oblige operators to become more efficient, forcing them to search for means to reduce production costs and give a better service to customers, something which will be beneficial to the economy as well as consumers.”

The minister also guaranteed that consumers will be protected from price exploitation and that liberalisation will eventually force those companies who increase their prices in the short term to reconsider. “When they come to the end of the month and understand that they have sold less petrol, they will certainly adopt another strategy,” he commented.

Pumps refuse to divulge prices

After the government announced that petrol prices were to be deregulated, speculation was rife about whether the cost of a tank of fuel would rise or fall. Now, in a surprise move, petrol vendors affiliated to Anarac, the National Association of Fuel Salesmen, have refused to release any information about the prices being charged at the pump.

Although the government no longer controls petrol prices, a legal statute has been passed which ensures that, “operators remain obliged to communicate on a weekly basis with the Director-General of Geology and Energy (DGGE)”. In fact, the law states that the average sales price of each product must be reported by “concelho, petrol station and type of petrol station before noon every Friday.”

The DGGE defines ‘operators’ as the eight biggest oil producers, oil products distributors and supermarkets selling gasoline. The instruction was communicated to the dealers in a letter dated December 31, which was signed by the head of the Economic Affairs Division, João Hermano.

But António Saleiro, the head of Anarac, has sent a circular to the 1,800 petrol stations run by association members stating that “true liberalisation does not exist because dealers do not have the computerised information, or the means that would enable them to change prices on a weekly basis.” Therefore, Anarac, in spite of their legal obligation, has decided not to communicate their prices to the companies, a position that, in practice, will force the eight biggest companies in the sector to fix their prices. “This cannot be considered a true liberalisation of the market place,” said Saleiro.

The government, meanwhile, has interpreted the petrol vendors’ complaints as simply a sign that they were happier when they did not have to consider the concept of competitive pricing. A source from the Ministry of the Economy said: “There are still some dealers against liberalisation, because they have discovered that it was better to have protected prices guaranteed by the state.” However, in the face of the alleged impossibility of setting differentiated prices, the dealers, via Anarac, are pondering making a formal complaint to the Competition Authority. They are proposing that a better way to ensure true price liberalisation throughout the market would be to post the petrol prices offered at various petrol stations along the way at the entrance to motorways.

There are about 3,000 petrol pumps scattered throughout the country, half of which are directly managed by the petrol companies themselves.