By Anthony O. Miller
MOTORISTS in Cyprus can expect a price-hike of two or more cents a litre at the pump for both petrol and diesel — and soon, according to BP’s Cyprus Managing Director, Cyprus George Petrou.
That is how much the four oil companies that operate the six petrol brands in Cyprus have suggested the government raise the pump price so they can recover the share of sale proceeds the government agreed they should, he said.
A decision on how much and when to raise prices could emerge today from a meeting planned between Commerce and Industry Minister Nicos Rolandis, Finance Minister Takis Klerides and the island’s four oil companies. Rolandis already met the oil companies about this on Monday.
When both sides agreed upon the oil companies’ current share of the pump price, crude oil was nearly half the $23 per barrel it is today, Petrou said. Then the oil companies were reaping windfall profits far above their agreed-upon share, he said.
So the government slapped a surcharge on those windfall profits, sending the money to the Defence Fund and the Electric Authority fund.
But as the crude oil price rose, the oil companies’ agreed profits per litre steadily fell to a point where they actually became a net loss per litre, especially before the windfall surcharge was lifted, Petrou said.
He said the government lifted that windfall levy yesterday. (Rolandis on Monday said the levy was being lifted “instantly”.) But that will not be enough to get the oil companies in the black by the end of the year, Petrou added.
In fact, unless the government raises the pump price by “at least two cents per litre per product”, Petrou said, the oil companies will lose £4.2 million by the end of the year.
This is because their share of the pump price, as set by the earlier boom-times agreement, will not cover their rising costs, much less give them the profits that shareholders want, he said.
Petrou declined to say what part of the pump price was the oil companies’ allocation. Instead, he said their pact with the government lets them make “12 per cent return on our equity”.
Rolandis conceded the crude-pump price squeeze was such that the oil companies “cannot make the agreed profit at the end of the year. …We have agreed the figures.”
The oil companies, he said, “are pressuring us for a fast increase. … The price at the pump should go up,” he said.
Asked if and when that price rise might occur, Rolandis said the answer could come as early as today.
