AMID news that crude oil hit an eight-week high above $82 a barrel, near its highest this year, the government said yesterday it was fast-tracking a bill enabling it to cap wholesale fuel prices.
The Consumers Association meanwhile urged the government to come clean on whether price controls for essential goods were possible or not, following press reports that a legal relic from the 1960s allowed for price caps.
At the moment the government can only set a ceiling on the retail price of fuel and gas. The hole in the law was laid bare recently when oil companies selling directly to the consumer did not comply with a price ceiling as they were not obliged to.
“The bill is ready and will be put to the Cabinet as soon as possible, perhaps even today,” Commerce Minister Antonis Paschalides told newsmen.
Paschalides reiterated he would not hesitate to order a new cap for fuel prices, especially as new supplies were expected to be significantly more expensive.
Nevertheless, it was not possible for the government to preemptively enforce a new cap on a hunch, Pachalides said.
“After the ships arrive, and after the fuel is delivered to the companies…and then to the petrol stations, only then can merchants raise their prices. And that takes a while.”
At any rate, no new shipments were expected over the next couple of days at least, he added.
Responding to a journalist’s observation that gas stations tend to bump up their prices on the same day as new shipments arrive, Pachalides said not all outlets behaved in this way.
Paschalides was taken to task over a report in yesterday’s Politis, claiming inaction on the part of his ministry despite legal advice given a year ago that it could temporarily regulate prices of essential goods.
According to the report, in February 2009 the Attorney-general’s office advised the Commerce Ministry that price caps do not in fact contradict EU law, provided however that certain conditions are met.
The government has in the past brushed aside calls for price caps for goods such as bread and milk, on the pretext that this would violate EU competition laws.
But citing the AG, the Politis story noted that an EU member-state can intervene in the market if the concept of fair pricing is not guaranteed by free market conditions – that is, if authorities establish profiteering,
In brief, the AG’s office advised that price caps (or alternatively profit margins) may be set only if these are in the public interest. In this, the AG cited a ruling by the Court of Justice of the European Communities.
One caveat is that a price ceiling must not benefit local products over imports. Because of transportation costs, a price cap may cause imported goods to become unprofitable to sell.
Moreover, again according to Politis, the AG advised the Commerce Ministry that it could activate two laws – dating from the 1960s – allowing for caps for both retail and wholesale prices.
Under these ‘emergency laws’, the government has the power to set caps for either wholesale or retail prices of certain goods, provided that beforehand the relevant authorities – the Commerce Ministry – declare these goods as being ‘under probation’.
At the same time, the AG recommended that these two laws be amended so that they do not clash with the EU acquis. Although the EU allows for market intervention in rare cases, it specifies certain conditions and procedures that must be followed before a price cap may be set.
For this reason, the AG advised that these laws be updated, otherwise the government would find it hard to justify a price cap if an aggrieved party took recourse to the Court of Justice of the European Communities.
Asked to comment on the above, Commerce Minister Paschalides told newsmen yesterday that either his ministry or the AG’s office would be issuing a statement within the day explaining the law. At press time no statements had been released.
