Fuel price hike to provide price competition at last

The contentious hikes in the price of petrol and diesel implemented this week have provided something of a silver lining in the form of the introduction of price competition in the market for diesel for the first time.

The price hikes that came into effect on Wednesday saw the cost of petrol and diesel each rising by four cents. The price of petrol rose to €1.31 per litre from €1.27 and the cost of diesel was hiked to €1.18 per litre from €1.14.

The price hikes, however, are only applicable to products sold by Enemalta offshoot fuel supplier Enemed but other suppliers of diesel are, so far, free to determine their own prices.

Sources within the industry speaking with The Malta Independent on Sunday have welcomed the new price competition but they have also questioned how long it might last, considering the recent experience of a Rabat petrol station that had attempted to sell diesel at cheaper than market prices.

As matters stand, petrol stations plying the products of the two other diesel suppliers - International Fuel Suppliers and the Falzon Group – are selling diesel at the same pre-price hike prices.

They also say that the suppliers have, in fact, called their client petrol stations urging them to not change their diesel prices to reflect this week’s Enemed price hikes. As such, petrol stations selling non-Enemed diesel are selling the product at the price of €1.14.

Another diesel product, ENDO Fuel – marketed as a high-performance diesel fuel – is being sold at seven cents per litre.

In an obvious plug for its product, the Enemed press release announcing the price hikes had stated that Enemed from this month will convert its diesel offering to E-Diesel. The company said the new fuel is of superior quality, has no biodiesel content and has a cetane rating of 55 as a minimum. The company said consumers will see better efficiency and the cars will produce 20 per cent less emissions.

In the meantime, Enemed has filed a planning application to relocate the 31st March tank facility in Birzebbuga to Has-Saptan, a move that will be financed by Enemed.

Industry sources speaking with this newspaper have speculated that the four-cent increase in petrol and diesel announced this week by Enemed could very well be aimed at financing what will inevitably be a costly move.

In February 2015 Enemed filed a planning application for infrastructural works at Has-Saptan, which would lead to the closure of the 31st March tank facility at Birzebbuga. The plans involve the change of use of existing underground storage tanks at Has-Saptan, tanks that will be refurbished and upgraded with modern safety features and will be used to store Enemed products.

The Rabat experience

The Office for Fair Competition recently slammed a Rabat petrol station and San Lucian Oil Company Limited, a member of Falzon Group Holdings, for having illegally entered into a Resale Price Maintenance (RPM) agreement.

The petrol station had announced a reduction in its price of diesel, only to have turned around and raised the price back again after pressure from the supplier. In so doing, the Office for Fair Competition had found, both had broken the law after it found that the petrol station had been warned by the supplier that its profit margin to it would be withdrawn if it failed to revert to the old price. The petrol station buckled to the pressure.

The Office found that, “The Director General has no intention of imposing any administrative fines on M&N Camilleri Petrol Station, since the Office considers that it was benefiting consumers by selling diesel at a lower price than the maximum retail price.

“Ultimately, the initiative introduced by the petrol station did not only increase price competition between retailers, but also increased consumer welfare. In view of this, even though the Office considers that the petrol station was party to an agreement which falls under Article 5, the Office does not want to deter any future initiatives from other retailers in a similar situation as that encountered by the petrol station, which initiatives would have the ultimate goal of benefiting consumers.”