The government has taken two decisions to stabilize the price of oil, according to an official announcement from the Media and Information Agency.
The first decision is that the excise tax will be reduced to 20%, aiming to ease the burden on citizens and reduce fuel prices. (Mathematically, the government's announcement was wrong, since the excise tax is currently fixed, around 39 lek per liter, and in percentage terms it is only VAT, but apparently it meant that it would be reduced by 20%!)
The second decision is to control profit margins and ceiling prices, with the aim of protecting citizens from abuses in the market. The Board will set profit margins for fuel trading companies at 3 lek per liter (wholesale) and 12 lek per liter in retail, aiming for more transparency and control. The Board will set ceiling prices according to international markets and violations are punished up to and including license suspension.
Yesterday, oil prices rose at the main fuel trading points by 10-15 lek per liter, reaching 214 lek, the highest level since the Russia-Ukraine war crisis, from 170-175 lek per liter until the end of February.
What will be the market effect of the excise tax reduction?
Regarding the decision to reduce excise duty, the effect on the market is expected to be around 8-10 lek per liter.
Luigj Aliaj, from the Association of Hydrocarbon Companies, says that the excise tax reduction is really minimal and that is the effect it will have on the market. "10 lek per liter is nothing. Just yesterday prices increased by 14 lek per liter. The government could completely lift this tax temporarily, which would give a stronger impact of 40 lek per liter.
Importers: The government is not interfering in profits, but in operating margins, oil supply is at risk
For importers, the government is confusing profit margins with trading and operating margins. The 12 lek profit margin that the government has set on the purchase price and taxes is not enough to cover the operating costs from the exit of the fuel from the depot to the retail supply points, which are around 18-19 lek per liter, while there is no mention of profit.
"If there is an attempt to set prices with Albanian boards and inventions, which are lower than the purchase costs + taxes + operating expenses, there will be a great risk that the market will remain without oil, since no one in the short term will supply the market at a loss. So it is good for the governments who manipulate the opinion that traders are earning a lot, to get ready to use their brilliant ideas to supply the market at cheap prices. They have an empty field, they have no legal obstacles. The normal path, as the economic system we have chosen to live in teaches us, is tax cuts, subsidies in influential branches and support with sovereign guarantees for the market, since under these conditions, double the capital is needed for operation," says Luigj Aliaj from the Association of Hydrocarbon Companies.
"If the international situation continues like this for a maximum of two months, price will be the least of the concerns. There will be no supply at all," he warns.
According to Aliaj, out of the 130 lek per liter, which are taxes, 100 lek are paid directly to customs (turnover tax 27 lek per liter, excise 39 lek per liter, VAT about 30 lek per liter), the rest are local taxes. The wholesale cost alone has reached 200 lek per liter. Then, transportation, bank expenses, wages, insurance, local taxes, depreciation, etc. must be calculated. The costs also vary according to the districts and points. 1 autobot from the warehouse in Tirana has a transportation cost of 3 lek per liter, while in Dibër 7 lek per liter. The operating costs of small points are greater than those of large ones and they are expected to be hit harder by price intervention.
"Instead of creating the Board, let the state immediately create the State Fuel Trading Entity. We are providing the infrastructure for free and let it bring oil at cheaper prices," says Aliaj, adding that the real concern at this time is the security of oil supply. "If the crisis escalates and global production shrinks, small operators will not have the power to supply themselves with fuel."
Today, about 50% of the country's oil is imported directly from Saudi Arabia and India, and the rest mainly from European countries.
The fuel sector in the country handles large volumes, but has one of the lowest profit margins. According to data from the 2024 balance sheets, the pre-tax profit margin for wholesale operators is around 0.5%, while for retail traders it is between 2 and 4.5%.
The record for diesel in the country was 265 lek per liter (with the blessing of the Board)
The country's oil price record was reached at 265 lek per liter in June 2022, following the escalation of the conflict between Russia and Ukraine, according to data maintained by Monitor. Even at that time, the government established the Transparency Board on March 12. At the time the Board was established, oil was around 230-235 lek per liter and the creation of the Board did not prevent the increase in prices, which peaked in June and remained above 200 lek per liter for months. (see chart at the bottom).
However, even importers, after October 2024, kept prices unchanged at 170-175 lek per liter for over a year, not reflecting decreases in stock markets, which are historically slower than upward movements!/Monitor.al/
