LAST MONDAY’S decision by Commerce Minister Antonis Paschalides to impose a ceiling price on petrol must qualify as one of the most absurd in the history of the Republic. There was no rational justification for it and nobody benefited from it, but even as a purely punitive measure, it was misdirected because it punished the wrong people – certainly not those responsible for the alleged profiteering which the minister wanted to eliminate.
The ministerial order placed a ceiling on pump prices that would have forced petrol stations to sell three types of fuel one cent lower per litre, than what they had been charging. If anything, this proved that there was no profiteering – 1.2 per cent above the price per litre the ministry considered reasonable could hardly be described as profiteering. A ministerial order would have been justified if the stations were selling fuel 10 or 15 cents per litre higher than the ‘reasonable’ price.
As for the benefits of the ceiling, it would make a driver whose car needed 50 litres of petrol per week, better off by 50 cents, or €2.1 per month – not an amount that would improve anyone’s standard of living. The saving was wasted on driving around town looking for a petrol station to fill up the car, not to mention the inconvenience of sitting in a queue for half an hour before getting to the pump.
The petrol station operators may have reacted irresponsibly by closing shop for the eight-day duration of the order, but they should never have been penalised – their gross profit margins are between five and six per cent. Is there any item on a supermarket shelf sold with such a small mark-up in price? It is the oligopolistic oil companies which set fuel prices and may be reaping big profits, so why did the minister penalise the station operators who are obliged to pay the price imposed by the supplier? They do not even have the luxury of buying fuel from another supplier.
It gets worse. The minister admitted that the oil companies were primarily to blame for the high prices, but the law had no provision for imposing a ceiling on the prices they were charging, so his order applied to the garages. An amendment to the law was prepared to allow the commerce minister to issue orders against oil companies. By Thursday afternoon, after inconveniencing people for two-and-a-half days, a face saving solution was found – the stations opened and the minister raised the ceiling on Friday so that everything could return to normal.
This was a display of colossal administrative incompetence, the measure being announced on an impulse without any thought being given to the possible consequences. We still do not know what the ministry expected to achieve with the order, but whatever it was, the ministry failed spectacularly. Even as a publicity stunt, it backfired, making Paschalides and his advisors look very foolish.
But we should not be surprised because the measure was a perfect illustration of the failure of successive governments to develop an energy policy. The commerce ministry may have an Energy Department but it has never had an energy policy. In fact energy policy is dictated by the trade unions of the Electricity Authority of Cyprus, and is geared to safeguarding the ultra-generous salaries of their members. It was the unions which forced the populist Parties to secure, by law, the monopolistic status of EAC as a seller of electricity. The unions also secured the monopoly of selling LNG.
At least there is some competition in the petrol market in contrast to the electricity market which is a law-protected monopoly. Paschalides and the Energy Department boss showed no sensitivity to the interests of the consumers as regards the recent increase of electricity rates, which the ministry fully backed. And more electricity hikes are planned, to cover the fines EAC has to pay for its high CO2 emissions. For years we knew that we would have to pay fines, but absolutely nothing was done about importing LNG. If we are lucky, the LNG terminal might be ready in six years but until then CO2 emission fines would keep rising and so would our electricity bills.
We may be paying the highest electricity rates in the EU, but the Minister of Commerce and the Energy Department chief cannot be bothered with such trivialities. They deal with much more important things, like reducing our petrol bills by a few cents, for three days.
