High fuel taxes limit impact of crude’s plunge on retail market

Crude oil prices may have plunged by about 40 percent over the past year but consumers in Greece have benefited only slightly from the price drop as fuel tax represents a substantial proportion of retail prices.

The price of unleaded fuel fell by just eight percent beween December of 2014 and the current month, from 1.42 euros per liter to 1.32 euros per liter. Diesel dropped by nine percent during the same period, from 1.174 euros per liter to 1.065 euros per liter. Heating fuel fell by 16 percent, from 92 cents to 77 cents.

The level of taxes imposed on unleaded fuel in Greece, representing 68 percent of retail prices, ranks as one of the highest in the EU. This boils down to meaning that a mere 30 percent proportion of unleaded fuel prices has been influenced by the plunge in international crude oil prices. This ratio more or less applies to all fuel sub-categories.

The limited benefits enjoyed by consumers are reflected in lower demand levels. Traffic jams in Athens during the festive season are misleading. Official industry data showed that demand fell by 4.1 percent in the ten-month period covering January to October, compared to the equivalent period a year earlier. In quantitative terms, this decline means that consumption of fuel and diesel has fallen by many thousands of liters. Unofficial fuel demand figures for November and December do not offer any signs for optimism either.

Traffic flow may have increased in the capital over the past few weeks but the picture is quite the contrary on the country’s national highways. Transportation of goods amid the economic slowdown has been particularly affected.

Considering these market conditions, a plan being considered by Deputy Finance Minister Tryfon Alexiadis to increase taxes imposed on auto fuel – based on the belief that the lower fuel prices may help raise tax revenues – will most likely fail to produce the desired results, if implemented.