Illicit shipping fuel trade persistent, latest measure a step back

Illicit shipping fuel trade in Greece remains a persisting issue despite a series of measures implemented by a succession of governments since 2002 to restrict movement by vessels of smuggled fuel.

In a latest initiative, the finance ministry is preparing a rule, which, if implemented, will nullify preceding measures, subsequently permitting, once again, the use of floating refueling means of any capacity without any restriction of movement.

Adoption of this rule will effectively facilitate the avoidance of special consumption tax payments on shipping fuel purchased.

Special consumption tax on shipping diesel is 410 euros per cubic meter, roughly the current market value of the fuel, while this tax on mazut is 38 euros per ton.

Relatively recent rules, introduced in 2015 and 2016, requiring shipping companies to install certified fuel inflow-outflow monitoring systems as well as GPS technology, have not yet been fully implemented and, subsequently, proved insufficient to stop illicit shipping fuel trade.

Many petrol station closures feared as fuel sales plunge

The country’s petroleum product traders and petrol stations are under extreme pressure as a result of the dramatic sales decline in March, down by as much as 70 percent. The drop is expected to sink deeper, to 90 percent in April. A decline of about 70 percent is projected for May.

These figures, provided by SEEPE, the Hellenic Petroleum Marketing Companies Association, are reshaping the liquid fuels market and could drive many petrol stations out of business.

A government measure postponing check payments by 75 days promises to offer some relief to the sector’s enterprises but does not take into account fuel market’s particularities, namely a heightened level of taxes on fuels, representing about 70 percent of prices.

Petroleum traders, who fully prepay these taxes when purchasing their fuel quantities, now face a liquidity squeeze as most of their customers, such as industrial enterprises, public sector companies and petrol stations, choose to pay by check.

Petrol stations are also under pressure as many of their customers have issued checks for payments. The resulting cash-flow squeeze faced by petrol stations has made it more difficult for them to place orders with fuel traders, who offer limited credit periods.

The measure postponing check payments promises to benefit just over one in six of the country’s 6,000 petrol stations, the 1,200 or so owned and operated by petroleum traders.

Many petrol stations could go out of business if checks issued by their customers are not exempted from the government measure and market conditions do not soon improve, petrol station owners fear.

 

Overall fuel sales slump by 4% in first four-month period

Overall fuel demand fell by 4 percent in the first four-month period compared to the equivalent period last year, extending the market’s recent run of lower consumption, data has shown.

Gasoline demand dropped by 4 percent in the first four months of 2019 compared to a year earlier, while diesel sales were down by 2 percent.

The overall 4 percent decline comes despite strong demand registered for heating fuel earlier this year as a result of the cold winter.

The lower diesel demand has been attributed to a slowdown in major projects, investments and building activity.

Overtaxation is seen is the main cause behind the drop in demand for gasoline, whose price levels have remained particularly high in the Greek market despite a drop in international prices.

Ongoing illicit fuel trade in Greece is affecting fuel-related tax revenues, depriving the State of roughly 300 million euros per year.

 

Overall Greek fuel demand continued slide in 2018, falling 5%

Volume-based fuel sales fell by 5 percent in 2018, driven lower primarily by weaker gasoline and heating fuel demand, which dropped by 5 and 17 percent, respectively, according to data released by SEEPE, the Hellenic Petroleum Marketing Companies Association. The drop in auto diesel demand was milder, falling 1.5 percent.

These latest figures, four months following Greece’s exit from the country’s bailout program, do not bode well for the economy, fuel data being a key indicator of its prospects.

The SEEPE figures could have been worse had it not been for the cold weather experienced in December, which generated a 15 percent increase in monthly demand for heating fuel.

Despite the latest slide in overall fuel demand, the extent of the drop is smaller compared to slumps of previous years during the recession, which has led to successive fuel demand reductions over the past seven years. Heating fuel demand has slumped by a total of 43 percent during this period.

Fuel taxes in Greece have played a big role in this weakened demand. Greece’s Special Consumption Tax (EFK) imposed on fuel is Europe’s third highest, behind the Netherlands and Italy, while the VAT rate, at 24 percent, is the continent’s fifth highest. Greek gasoline prices are the EU’s third highest. Netherlands tops the list and is followed by Italy. VAT rates in most developed EU states range between 19 and 21 percent.

Greece’s VAT-EFK combination is causing double taxation – or tax on taxes.

The influence of euro-dollar exchange rates has impacted fuel prices in Greece at an extent of between 30 and 40 percent. Local retail fuel prices are mainly shaped by fuel taxes to a degree of between 60 to 70 percent, well over the EU average. The fuel tax proportions are lower in member states such as Germany, Finland and France, where disposable income levels are far higher than in Greece.

 

 

Confusion abounds over fuel price-limiting surcharge

In the heart of summer, the cost of unleaded fuel at petrol stations on the Greek islands reached the 2-euro per liter level, prompting RAE, the Regulatory Authority for Energy, to propose the implementation of a price ceiling in 17 regions. However, the Economy and Development Minister Yiannis Dragasakis tabled a counterproposal entailing the adoption of a subsidies measure to offset fuel transportation costs as the most effective way of tackling the issue.

Now, several weeks later, unleaded fuel prices on islands have risen again to levels just below 2 euros per liter. Meanwhile, government officials do not appear to know what this subsidies measure will end up costing, how many liters of island-bound fuel it will be valid for, and if funds exist to finance it.

Financing such a measure should not be an issue for the government. Petrol station companies contribute 1.2 percent of the price of each liter of fuel to the national budget, SEEPE, the Hellenic Petroleum Marketing Companies Association, has reminded in seven letters forwarded to six different ministers over the past three and a half years.

Mid-way through 2015, the government abolished a special account taking in these payments but petrol stations have needed to keep paying their 1.2 percent contributions over the past three and a half years. It has remained unclear where this money is ending up, how it is being utilized and by whom. Yet, the 1.2 percent surcharge on fuel remains attached to the retail sums paid by consumers. The surcharge was introduced with the purpose of restricting fuel prices on islands.

SEEPE, in its series of letters addressed to ministers holding ecomomy, energy and finance portfolios, has demanded to be informed on how this pool of funds is being used but has yet to receive any response.

Roughly 6 million tons of fuel is transported each year, meaning that funds raised through the surcharge amount to between 45 and 50 million euros per year.

 

 

 

 

RAE expected to reach decision today on fuel price ceilings

RAE, Greece’s Regulatory Authority for Energy, is examining data provided by the General Secretariat for Commerce to decide if price ceilings will need to be imposed on liquid fuels in order to protect consumers from extraordinarily high price levels observed around the country this summer, especially on islands.

Over the past three days, RAE officials have been examining the details of a 30-page study focused on over-inflated fuel prices to decide if current price levels, which in some cases have exceeded two euros per liter for unleaded gasoline, are justified.

Transportation costs, wholesale and retail fuel market profit margins, fuel price comparisons around the country, fuel tax levels, as well as other factors influencing price levels, both domestically and internationally, are all being examined at RAE.

The authority is seen reaching a decision on the matter today, which is then expected to be forwarded to the Ministry of Economy and Development as a policy proposal, energypress sources informed.

According to unconfirmed reports, extraordinary price-control measures, most probably in the form of fuel price ceilings, will be imposed on certain island markets.

If introduced, these fuel price ceilings will be valid for an initial two-month period and then be revised weekly, sources noted.

RAE to propose fuel price limit, prices up on the islands

RAE, Greece’s Regulatory Authority for Energy, is examining the prospect of proposing a price ceiling on liquid fuels in various regions around the country where price levels of unleaded gasoline and other petroleum products have risen to extraordinarily high levels.

The authority’s board is expected to meet either today or tomorrow to decide on whether to forward a substantiated price-ceiling proposal to the Ministry of Economy and Development, energypress sources informed.

RAE officials have been examining price-related fuel data gathered over the past couple of months to determine whether retail prices, up to levels of approximately two euros per liter for unleaded fuel, and in some cases even higher, are justified.

Citing one extreme example, a local fuel price monitoring agency has pointed out that unleaded fuel is selling for as much as 2.045 euros per liter on the island Sikinos.

RAE was prompted to take action as a decline of the country’s average price for unleaded fuel between June and July, from 1.654 euros per liter to 1.634 euros per liter, was not reflected in many areas around the country, including islands.

On the Cyclades, unleaded fuel prices currently range between 1.95 and 1.99 euros per liter on Milos, Amorgos, Anafi, Andros, Naxos, Sifnos, Serifos and Santorini.

On Skopelos, Alonissos and Patmos, prices have ranged between 1.997 and 1,999 euros per liter. Price levels of as high as 1.99 euros per liter have been recorded in Ikaria.

Market officials have attributed the elevated fuel prices on islands to the small number of suppliers and the disproportionately large number of petrol stations given the small size of islands. As a result, petrol station owners are seeking to rake in profits during the summer season’s higher demand and secure  sustainability as business activity during the rest of the year is minimal at best.

High fuel tax levels and transportation costs have also contributed to the elevated prices on islands.

 

Poor December figures dampen fuel sector’s overall 2017 performance

Subdued fuel demand figures registered in December, including sale level drops  for certain categories, impacted the sector’s overall performance for 2017, which ended slightly down compared to the previous year.

More specifically, in December, gasoline demand fell by a level of between 2 and 3 percent compared to the equivalent month a year earlier. Heating fuel demand fell sharply by 30 percent compared to December, 2016, primarily as a result of the milder winter experienced so far, combined with a preceding reinforcement of reserves. Also, emerging as the most surprising result of all, auto diesel demand fell by a considerable 10 percent.

Subsequently, the overall drop in sales for 2017 is estimated to be between 1 and 2 percent, primarily as a result of the steep drop in heating fuel sales.

These end-of-year results effectively mean that the fuel sector failed to register a solid rebound for yet another year.

Officials are concerned that a tax hike planned for diesel will further impact the sector.

 

Consumers face tariff hikes as ministry balks at RAE plan

Household electricity consumers and other low-voltage categories could face tariff increases of between two and three euros per MWh over the next five-year period to cover older and current Public Service Compensation (YKO) returns to the main power utility PPC as a result of the finance ministry’s hesitation to endorse a plan forwarded by RAE, the Regulatory Authority for Energy, that would transfer coverage of these YKO-related costs to the national budget and, therefore, offer some relief to electricity consumers.

The finance ministry is avoiding offering its endorsement to the RAE plan, fearing a negative response from the country’s lenders and, even more critically, the difficulties involved in finding the equivalent amounts through the national budget.

RAE has proposed limiting PPC’s Public Service Compensation (YKO) retroactive return, covering 2012 to 2014, to 360 million euros, well under the 735 million euros demanded by the utility, and covering the amount through half the special consumption tax (EFK) raked in by the Greek State for petrol used by PPC to operate its costly diesel-fueled power stations on the non-interconnected islands.

RAE’s proposal would require the Greek State to cover the cost of running state-controlled PPC’s high-cost power stations through hefty fuel taxes it imposes. It is estimated that the Greek State collects 180 million euros per year in fuel taxes related to outdated generators being used by PPC on Greece’s non-interconnected islands.

The YKO surcharge added to electricity bills is paid by consumers to primarily subsidize high-cost electricity production on Greece’s non-interconnected islands and also support the Social Residential Tariff (KOT) program offering underpriviledged households subsidies for lower-cost electricity.

 

Officials recall monitoring drive following poor fuel tax figures

Pressured by the need to boost tax revenues, government authorities have resumed taking action to counter the country’s illicit fuel trade problem following a far softer stance last year. The number of inspections conducted has risen by over 270 percent since last year, while a new effort is being made to increase monitoring by making the installation of GPS systems mandatory for fuel trucks.

Employees at the energy ministry’s fuel handling and storage controls authority (KEDAK) had stopped conducting inspections as a result of a bonus cut but disappointing tax revenue figures have prompted a new effort to clamp down on fuel smuggling activities.

According to finance ministry data, 6,443 inspections were conducted during the first four months this year, compared to just 1,702 throughout the entire first half of 2016. This represents a 278 percent increase. Also, fines worth a total of 9.5 million euros were imposed during the first four months of the current year, up from 1.97 million euros in the first half of 2016, a 382 percent increase.

These percentage increases were exacerbated by the subdued monitoring activity by authorities last year. In 2014, authorities carried out 27,365 checks. They dropped to 8,850 in 2015 and rose to 12,018 in 2016, according to energy ministry data.

Energy product special consumption tax (EFK) revenues for the first four months of the year fell short of the target figure by 102 million euros, or 6.8 percent, while fuel EFK revenues were 26 million euros, or 4.1 percent, below the target. If this rate is to be continued until the end of the year, the Greek State will be deprived of roughly 400 million euros in fuel-related tax revenues.

 

 

RAE proposes YKO coverage through fuel tax transfer

An agreement reached between the government and the country’s lenders on the Greek bailout’s second review, announced yesterday, includes a section requiring settlement of outstanding public service compensation (YKO) payments by 2022.

This essentially means that the energy ministry will need to figure out a way to deliver pending YKO payments owed to the main power utility PPC without increasing electricity bill charges for consumers, a development that would further weaken the coalition, well behind in polls.

Highlighting the dilemma faced by energy minister Giorgos Stathakis, an initial announcement released by the ministry yesterday promised that the outstanding YKO payments would be settled over a five-year period so as to avoid considerable electricity bill increases before a revised follow-up statement was released noting the issue would be sorted out over five years without any electricity bill increases.

Public compensation surcharge amounts, raised through electricity bills, are primarily used to subsidize higher-cost electricity generation on the non-interconnected islands. PPC is the main recipient of YKO amounts as it operates high-cost mazut and fuel-powered power stations on the non-interconnected islands. Since 2012, full YKO-related amounts had not been fully paid out to avoid electricity bill increases. An amount owed to PPC has accumulated.

PPC claims this amount has reached 735 million euros. RAE, the Regulatory Authority for Energy, is currently making an effort to see where the figure stands. Initial estimates by the authority indicate the figure is considerably less – around 400 million to 500 million euros.

YKO-related books have not been adequately kept, creating confusion. IPTO, the power grid operator, theoretically responsible, and another operator, HEDNO, will need to provide updated figures to RAE over the next few days. Full clarity on the issue will need to be established by the end of the month.

Authorities will need to decide whether the required YKO amount will be fully provided by consumers or if the state can cover at least part of the amount, if not all.

RAE chief Nikos Boulaxis recently told Greek Parliament that state budget coverage of public compensation surcharge amounts is common practice in most EU states.

According to energypress sources, RAE intends to propose that the state cover at least part of the outstanding YKO amount. This could be achieved through the state’s transfer of special consumption tax (EFK) collected for island power unit fuels to the public compensation service account. This amount is estimated at between 100 million and 130 million euros, annually.

 

Fuel prices to be pushed up by crude oil, imminent tax hike

The arrival of higher fuel taxes in Greece, decided on earlier this year and set to take effect as of January 1, coupled with elevated international crude oil prices, which appear to have stabilized at the loftier levels recorded over the past few months, promise steeper fuel prices for all consumer categories.

The higher crude oil prices have already influenced fuel prices, up by about three to four cents over the past ten days or so, elevating gasoline prices to around 1.49-1.50 euros per liter, diesel to 1.18-1.19 euros per liter and heating fuel to 96-98 cents per liter.

The higher special consumption tax, which was imposed on heating fuel on October 15 and will now also be applied to all auto fuels as of January 1, will bring about further price increases.

An extra 3 cents per liter of special consumption tax will be imposed on unleaded fuel, which, along with the VAT surcharge, will increase the tax to 3.7 cents and elevate the fuel’s average retail price to 1.53-1.54 cents per liter.

An additional 8 cents per liter of special consumption tax will be imposed on diesel, which, with the VAT surcharge, will reach 9 cents, taking this fuel’s average retail price to 1.27-1.28 euros per liter.

As for LNG, an extra 10 cents per liter of special consumption tax, to reach 12 cents with the VAT surcharge, will increase the fuel to 84 cents per liter from the current level of 72 cents per liter.

The government anticipates it will collect 492 million euros from these new taxes in 2017.

However, the findings of an IOBE (Foundation for Economic and Industrial Research) study conducted in October support that the fuel tax hike will reduce fuel consumption and, by extension, tax revenues, while increasing business costs.

The tax hike will subdue expected GDP growth by 0.3 percent – 530 million euros per year – in 2017, 2018 and 2019, according to the IOBE study. The subdued GDP growth translates into 10,700 job losses per year and an annual 178 million-euro reduction in other tax revenues and social security fund contributions, the IOBE study determined.

Fuel trade inspections plunge amid rampant smuggling trend

The number of inspections being carried out to combat illicit fuel trade has fallen drastically, latest finance ministry data has shown, highlighting the absence of state action at a time when consumers are being called upon to boost tax revenues, including through fuel tax hikes.

Data made available showed that the number of inspections carried out between 2014 and the first half of 2016 have plummeted.

A total of 27,365 inspections were carried out in the fuel trading sector in 2014, while just 1,702 were conducted in the first half of this year. A mere 60 liters of unleaded fuel were confiscated amid this drastic slowdown. Diesel confiscations amounted to 6,260 liters.

In 2015, a total of 8,850 inspections were carried out, down by 67.6 percent compared to the previous year.

Tax hikes have just been imposed on heating fuel, as of October 15, while tax increases will also be imposed on auto fuel as of January 1.

Authorities claimed the lack of monitoring is the result of inefficient implementation of control mechanisms as well as a major staff shortage.

Trading data is being relayed to the finance ministry through an “inflow-outflow” data system installed at petrol stations to track purchases and sales, but officials are not utilizing the incoming data. The tracking system has apparently been installed at 99 percent of the country’s petrol stations but is not functional, as was once again pointed out last week by Yiannis Aligizakis, president of SEEPE, the Hellenic Petroleum Marketing Companies Association, at an industry event.

 

Fuel smuggling remains rampant, monitoring missing

Illicit fuel trade has remained rampant seven years after legislation introducing an “inflow-outflow”data monitoring system for petrol stations, intended to enable the finance ministry to track purchases and sales in the sector.

The Syriza-led coalition, elected in January, 2015, had stressed it would wipe out fuel smuggling practices and generate increased fuel tax revenues, but this objective has utterly failed.

Since the bill’s introduction, the private and public sectors have spent over 100 million euros for the measure’s various requirements, while numerous committees and sub-committees have been assembled to address related issues, all to no avail so far.

Fuel smuggling has remained unaffected as the Greek State has ratified laws but failed to fully enforce them. The ineffectiveness of the “inflow-outflow”data, which has cost petrol station owners and the public sector close to 95 million euros to set up, is a glaring example of this failure.

It remains a mystery as to why the “inflow-outflow”data system is not yet fully functional despite having been installed at 99 percent of petrol stations, as was pointed out by Yiannis Aligizakis, president of SEEPE, the Hellenic Petroleum Marketing Companies Association, at a recent industry event. Incoming data is not being processed or utilized at the finance ministry.

Making matters worse, a study conducted by the National Technical University (NTUA) and whose results were released this week, showed that roughly fifteen percent of petrol stations are undersupplying customers at the pump, based on what they are charged, compared to four percent four years ago. These discrepancies are being picked up by the “inflow-outflow”data system but it is believed ministry officials are not processing the data.

As a result, the Greek State is being deprived of fuel tax revenues estimated at between 250 million and 300 million euros per year. Also, unfair competition is being supported as a result of the higher business costs burdening law-abiding enterprises.

Rather than clamp down on fuel smugglers, the government is instead preparing to introduce a new round of tax fuel hikes in an effort to raise roughly 492 million euros in fuel tax revenues next year.

Big questions need to be asked as to why illicit fuel trade remains evasive in Greece.

 

 

 

 

 

Roughly 15% of petrol stations cheating drivers, study shows

Roughly fifteen percent of petrol stations are undersupplying customers at the pump compared to four percent four years ago, according to research conducted by the National Technical University (NTUA).

The study, whose results were published today, showed that the cheating practices are primarily being performed by petrol stations offering lower prices.

The results are based on a sample of 150 petrol stations operating in the wider Athens area, which were checked between August 22 and October 3.

The study’s director, Fanis Zanikos, noted that 85.5 percent of samples passed the test while the remainder failed.

Discrepancies are being detected through an “inflow-outflow” monitoring system installed at most petrol stations but still not yet fully operational despite certain steps taken in more recent times, it was pointed out during a presentation of the survey’s results.

Yiannis Aligizakis, president of SEEPE, the Hellenic Petroleum Marketing Companies Association, noted that the “inflow-outflow” monitoring system has been installed at 99 percent of petrol stations for a total cost of 90 million euros, while adding that processing and utilization of data is not being carried out. System software had yet to be certified, the SEEPE chief also noted.

Commenting on illicit fuel trade, Aligizakis said resulting annual tax losses for the state amounted to between 250 and 300 million euros per year.

SEEPE officials called for the government to reexamine upcoming fuel tax hikes, noting that tax revenue targets will not be achieved as a result of the negative impact by the taxes on consumption levels. The association also requested more inspections at petrol stations.

IOBE report: Fuel taxes to hit growth, spark illicit trade

New fuel tax increases set to be introduced, beginning with heating fuel as of October 15, will severely undermine the Greek economy’s growth potential as well as tax revenues, according to IOBE, the Foundation for Economic and Industrial Research, in a study officially released today.

The tax revenue shortage will be caused by a further dampening of market demand as a result of the fuel tax hikes, the IOBE study notes. Besides heating fuel, tax increases on gasoline, diesel and LNG will follow as of January 1.

The government hopes this latest round of fuel tax hikes can rake in a further 400 million euros by the end of 2017.

The fuel tax hikes are made harsher by the current rebound seen in international crude oil prices, which have risen from 46 dollars to 51 dollars a barrel over the past couple of weeks, prompted by a late-September OPEC agreement for a freeze of daily output levels as of  November.

Assuming no major price fluctuations take place over the next few days in crude oil and the euro-dollar exchange rate, heating oil is expected to hit the Greek market at 92 cents per liter, up 8 percent from last year’s level of 84 to 85 cents per liter registered during the equivalent period.

This heating fuel price rise is the result of a higher special consumption tax (EFK) rate, from 23 cents to 28 cents per liter, a VAT increase on fuel from 23 percent to 24 percent, as well as refinery price increases.

Concerns over the financial standing of Deutsche Bank are applying pressure on the euro currency against the dollar.

Besides the IOBE study, Eurostat and Greek finance ministry figures also highlight the negative impact of fuel tax hikes on demand levels. Since 2009, when fuel tax hikes began rising in recession-struck Greece, fuel demand has fallen by at least 39 percent, severely affecting tax revenues.

The IOBE study also warns that illicit fuel trade will be encouraged as a result of the tax hike and inability by officials to fully enforce an “inflow-outflow” data monitoring system that would enable the Finance Ministry to track purchases and sales in the sector.

IOBE: Fuel taxes to prompt tax revenue shortage, smuggling

New fuel taxes intended to raise 400 million euros over the next year will instead prompt a tax revenue shortage as a result of a further drop in market demand for fuel and increased illicit fuel trade, a study conducted by IOBE, the Foundation for Economic and Industrial Research, has forecast.

The IOBE study, commissioned by SEEPE, the Hellenic Petroleum Marketing Companies Association, will be officially presented on October 10.

The foundation’s study, factoring in various consumption level assumptions, fears the new fuel taxes, to begin with a hike on heating fuel tax as of October 15, will not produce the desired tax revenue results as a result of a further reduction in disposable incomes.

Experience has shown that tax revenues are negatively impacted whenever fuel taxes are hiked, the IOBE report notes, while adding an escalation in fuel smuggling practices could be sparked by the government’s new tax assault.

Heating fuel is expected to hit the market in less than two weeks, on October 15, at a price of 90 to 91 cents per liter, up 7 percent from last winter’s level of 84 to 85 cents, assuming no major crude price fluctuations take place until then. Such a prospect has not been ruled out by analysts.

The anticipated 7 percent increase in heating fuel is entirely the result of an increase in the special consumption tax (EFK) and the hike in the VAT rate imposed on the EFK tax. The VAT rate for fuel has been hiked to 24 percent. International crude prices, currently unchanged compared to last year, have nothing to do with the aforementioned heating fuel price estimate.

As of January 1, gasoline and diesel prices will also be sold at higher prices, by roughly 10 cents and 5 cents, respectively, per liter, representing respective increases of 9 percent and 4 percent, as a result of the EFK hike.

Last week’s decision by OPEC members to retain the cartel’s daily oil production level as of November is prompting an upward trajectory in prices. In addition, fears about the financial standing of Deutsche Bank are pressuring the euro currency against the dollar, meaning the EU’s common currency will not be able to absorb any international crude price increases.

The series of fuel price increases and overall domestic uncertainty could affect Greece’s GDP growth in 2017, the IOBE study warns. The government has set a GDP target growth rate of 2.7 percent for 2017.

 

 

No plans to raise tax on fuel, energy minister says

The Greek government is not examining any plans to raise a special consumption tax on fuel, Energy Minister Panos Skourletis said today.

In comments made to public broadcaster ERT, Skourletis said that budget revenues were moving within targets, adding that August figures would be boosted by an increased tourism product.

Skourletis reiterated that the government wants to transfer a 17 percent share of PPC from TAIPED, the State Privatization Fund, to a new superfund in which TAIPED will be a subsidiary, for utilization rather than privatization.

The energy minister added that TAIPED, seeking to execute bailout-listed privatizations, must conform to the governemnt’s policy.

Commenting on DESFA, the natural gas grid operator, Skourletis said negotiations were currently underway to sell a 17 percent share which Azerbaijan’s Socar, the winning bidder of an international tender offering a 66 percent stake of the operator, must surrender following European Commission intervention. Skourletis added that the sale price of 400 million euros, for DESFA’s 66 percent, is too low, noting that a recent evaluation put the operator’s value at two bllion euros.

On the contrary, Azeri officials at Socar believe the DESFA price is too high following the Greek government’s recent ratification of measures that severely limit the operator’s revenue potential.

Fuel sales drop of 7.1 percent in May mars tax revenue effort

Fuel tax increases are negatively impacting fuel-related tax revenues, market data for the first half of 2016 has shown.

Fuel-related VAT collections fell by 140 million euros in the first half of the year, while the Special Consumption Tax collected during the same period fell by 33 million euros, according to local business news daily Imerisia.

Data provided by the Hellenic Statistical Authority highlights the problem faced by the government’s attempt to boost tax revenues. Fuel sales fell by 7.1 percent – in volume terms – in May, while, over the first quarter, the decline measured 6.6 percent.

Based on these figures, the tax-revenue potential of an already-ratified Special Consumption Tax hike on fuel, to take effect mid-October for heating fuel and January 1 for all other fuels, is doubtful, especially if forecasts of slightly higher international oil prices are confirmed.

The tax hike will, as of Janury 1, increase the Special Consumption Tax imposed on unleaded fuel from 0.67 euro to 0.70 euro per liter, from 0.33 euro to 0.41 euro for every liter of diesel, from 0.33 euro to 0.43 euro for every kilo of LNG, and, as of October 15, from 0.23 euro to 0.28 euro per liter of heating fuel.

Further fuel tax rises causing market nervousness

The impact of new tax hikes to be imposed on fuel is a question on the minds of all sector officials, alarmed by the tragic weekend news concerning the suicide of 84-year-old entrepreneur Kyriakos Mamidakis, founder and president of Mamidoil Jetoil, an enterprise that had filed for bankruptcy on June 9.

An additional two fuel sector enterprises are believed to be on the verge of going out of business.

Fuel consumption levels in any economy reflect its growth or contraction. Last month, the fuel consumption decline registered in Greece was the biggest ever. Compared to the equivalent month last year, unleaded fuel demand plunged by 14 percent in June, while diesel fell by seven percent.

Part of the sharp 14 percent decline this June was attributed to the surge in demand during the final days of June last year, when drivers flocked to petrol stations to fill their tanks fearing shortages as a result of the capital controls that were imposed. Not factoring in the effect of capital controls, the drop would have been about ten percent, market officials believe.

Officials are bracing for the autumn season and the impact of higher fuel taxes on the demand of heating fuel, to sell for five to six cents more per liter. Also, as of the beginning of 2017, unleaded fuel will cost drivers four cents more per liter, while diesel will cost an additional 10 cents per liter. The wider effects on the economy are also a concern.

“The fuel tax hike has arrived at the most inappropriate time. Fuel sales have fallen by 45 percent since 2009, companies are constantly seeking capital to meet tax payment commitments for fuel purchased, which runs contrary to other European markets, and tampered with petrol pumps are robbing customers,” noted Yiannis Aligizakis, president of SEEPE, the Hellenic Petroleum Marketing Companies Association.

 

 

Fuel smuggling persists, aided by lack of authority checks

Besides not contributing to tax revenues as a result of fallen demand, overtaxation in the fuel market, the result of shortsighted policies pursued in previous years and at present, has also brought about a reinsurgence of illicit fuel trade.

Fuel smuggling activity has increased despite the implementation of an “inflow-outflow” monitoring system at petrol stations, supplier facilities and refineries, which, theoretically, should be significantly reducing the level of illicit fuel trade.

Esssentially, the “inflow-outflow” monitoring system is failing to produce results because inspections are not being conducted, market data is not being cross-examined, and gaps exist in the system.

Market sources noted that checks on data entered into the system by petrol stations managers each night, at closing time, are not being conducted at the Finance Ministry’s General Secretariat for Information Systems as a result of a “lack of staff”. The same applies for trading information being submitted by suppliers.

In addition to all this, the “inflow-outflow” monitoring system was incorrectly installed to start off with as it is not based on a single software system. The country’s petrol stations have been installed with a variety of software systems, based on specific standards set by the government, by a number of teams that worked on the project.

However, the biggest problem of all is the lack of a complete and detailed registry listing all existing fuel storage facilities in Greece. This is leaving gaps open for smugglers to exploit. The majority of illicit fuel trade is linked to unregistered fuel storage facilities.

In addition to the “inflow-outflow” monitoring systems installed at petrol stations, supply companies and refineries, all fuel storage facilities also need to be registered and monitored.

 

Fuel demand down by 8% amid recession despite lower prices

The prolonged recession, its consequent intensifying anxiety felt by consumers, and the government’s barrage of taxes are further subduing households and disposable income levels, which is flattening any favorable market prospects offered by lower fuel prices.

Although the current average of fuel prices is 10 percent lower compared to last year, consumption levels have fallen and also establishing themselves at these lower levels.

Unofficial petroleum company data for the month of May showed total sales at fuel stations fell by eight percent, year-on-year, in volume terms.

Yiannis Aligizakis, president at EEPE, the Hellenic Petroleum Marketing Companies Association, noted that this considerable fuel demand drop concerns both unleaded fuel and diesel.

The official pointed out that last month’s drop in the demand for auto diesel was the first to be registered in two years, which, he added, reflects reduced business and industrial enterprise orders as a result of subdued overall demand.

Households, too, affected by increasing financial burdens and a negative psychology generated by a general fear that worse could still lie ahead, are limiting their car use, as indicated by last month’s eight percent drop in fuel demand, as well as other necessities, which, in turn, is reducing manufacturing levels, delivery transport, and diesel sales.

Worse still, many analysts forecast that international crude prices will rise over the next few months, which makes the country’s new fuel taxes an untimely addition for consumers as well as the government’s tax revenue objectives.

New fuel taxes will affect heating fuel in autumn and auto fuel – unleaded and diesel – as of 2017. A just-imposed one percent VAT hike on fuel, from 23 percent to 24 percent, prompted slight fuel price increases of about one cent per liter, but this is seen as a prelude compared to the prospective hikes to be caused by special tax consumption (EFK) increases.

At present, taxes in Greece represent 69.5 percent of fuel prices, whereas, as of 2017, the figure will increase to 71 percent once the special tax consumption on fuel is hiked.

Heating fuel is expected to increase by 7 to 8 cents per liter in October. As of January, 2017, the rise in diesel prices is expected to reach 11 to 12 cents per liter once the EFK hike is introduced on top of the VAT increase. Also at the beginning of 2017, unleaded fuel prices are foreast to increase by 5 to 6 cents per liter.

 

Fuel prices set to increase as of June 1 following tax hike

Fuel prices in the Greek market are set to rise as of June 1 following a recent government decision to increase the special consumption tax (EFK) imposed on fuel.

The tax on unleaded fuel will be increased to 700 euros from 670 euros per 1,000 liters. This will result in an increase of about five cents per liter for unleaded fuel at the pump, from the current aveage of 1.35 euros per liter to 1.40 euros per liter.

In the diesel category, the special consumption tax will increase from 330 euros to 410 euros per 1,000 liters, which will result in a hike of eight cents per liter, from one euro per liter to 1.08 euros per liter.

As for heating fuel, the special consumption tax will increase from 230 euros to 280 euros per 1,000 liters, leading to a retail price increase of six cents per liter, from 75 cents per liter to 81 cents per liter.

The tax imposed on auto LNG will be increased from 330 euros to 430 euros per 1,000 liters.

Natural gas used at gas-fuled power stations will be exempted from the special consumption tax as a measure aiming to support the country’s industrial sector.

Fuel tax hike to further affect already weakened demand

Overall fuel demand in Greece fell by eight percent in the first quarter of this year, compared to the equivalent period last year, reflecting the growing financial difficulties faced by consumers as well as petroleum sector firms, latest official market data has shown.

Quarterly demand shrunk by 140,000 tons, from 1,745,927 liters to 1,605,350 liters, not including certain major consumers such as PPC, the main power utility, and heavy industry, a development that underlines the market’s worsening condition.

Market authorities believe that tax revenue objectives set by officials through a fuel tax hike are overambitious as a result of flagging demand, which, as a result of the higher tax rates, can be expected to weaken further.

The tax hike is expected to increase the retail price of diesel by 10 to 12 cents per liter, unleaded fuel by 3 to 5 cents, heating fuel by 8 to 10 cents, and auto LNG by 7 to 8 cents.

Breaking down the local market’s first-quarter fuel figures, demand for unleaded fuel fell by 2 percent, increased by 4 percent for diesel, and slumped by 22 percent for heating fuel.

Given that the special consumption tax (EFK) increase will be greatest for the diesel sub-category, its recent upward trajectory in terms of demand is expected to be interrupted. Recent new car buyers have prefered diesel models, which prompted the first quarter’s 4 percent increase in the demand for diesel.

Initiatives taken by drivers to purchase diesel car models, encouraged by lower diesel prices, once again prove that the government cannot be trusted by consumers and enterprises when it comes to long-term decision-making. Besides affecting diesel fuel consumption, the increased demand for diesel car models is now also expected to slow down.

Market officials noted that the special consumption tax increase on auto fuel will primarily affect the economy’s productive sectors. Over 50 percent of local fuel demand is generated by enterprises, transportation companies, industries, and professionals. The tax hike is expected to have a domino effect on transportation costs, fares, as well as prices of consumer goods.

The rising international oil prices witnessed of late and the euro’s ascent against the dollar only make the problem worse. This could all lead to a sharp retail price increase for auto and heating fuels, which would further flatten consumer demand and create new problems for the local petroleum industry.

 

 

Cost of natural gas for industry in Greece is EU’s third highest

The cost of natural gas for industrial use in Greece ranks as the EU’s third highest, according to Eurostat data, as a result of the considerable amount of taxes imposed on the energy source.

Even so, the Greek government appears to be preparing to increase taxes on natural gas. Eurostat data showed that the price of natural gas for industrial use in Greece was 3.79 euros per KWh during the first half of 2015, higher than levels registered by EU economic powerhouses such as Austria, Germany, Denmark, the Netherlands, France, and the UK.

Finland and Sweden, ranked first and second respectively, are the only two EU member states whose natural gas costs for industry exceed those of Greece’s.

At present, Greece imposes the highest level of special consumption tax on natural gas for industrial use in the EU. This tax level in Greece is more than double the rate suggested by an EU directive. As a result, the cost of natural gas imported increases by at least 40 percent as a result of this tax alone. About 65 percent of gas imported into Greece is used for electricity production. Worse still, the special consumption tax is not recoverable, as it cannot be offset against sales and exports, as is the case with value added tax.

Industrialists have every reason to believe they are being fooled by the government’s repeated announcements of prospective energy cost cuts for the sector. These promises not only remain unfulfilled but seem to be headed in the opposite direction, as highlighted by the latest thoughts to increase the special consumption tax imposed in natural gas for local industry.

The Greek government expects its plan to increase fuel taxes will raise an additional 200 million euros in tax revenues. Based on early indications, the fuel tax hikes will be widespread as a means of spreading out the resulting cost burden, and will cover liquid fuels, diesel, LNG for vehicles, as well as natural gas for household and industrial use. Initially, the government was considering a single tax hike for liquid fuels, which would have increased the special consumption tax for this category by 10 cents per liter.

 

ELPE fuel sales up in February, wider turnaround not certain

Fuel sales at ELPE (Hellenic Petrolum) increased by five percent in February, year-on-year, but it remains unclear whether this encouraging company development suggests an overall turnaround for Greece’s fuel market.

Auto diesel fuel sales increased by 15 percent, but heating fuel sales fell by 35 percent, subdued by the warmer-than-usual winter weather, while marine fuel sales increased sharply. More specifically, marine diesel oil sales rose by 50 percent and mazut sales were up 35 percent.

Whether the rise in fuel sales experienced at ELPE in February reflects a wider trend will be made clearer over the next few days when more market data becomes available.

January proved to be a poor month for fuel sales in Greece, compared to the equivalent month a year earlier. Unleaded fuel sales fell by 9.7 percent, auto diesel fuel sales were down 7.7 percent, heating fuel sales dropped by 17 percent, marine diesel oil sales fell by 18 percent, mazut sales fell 10 percent, and LNG sales dropped by 4.7 percent. Jet fuel was the only fuel product to register a sales increase in January compared to the same month a year earlier, rising by 4.3 percent.

Certain market pundits believe that January’s poor fuel sales figures may be linked to the month’s increased fuel stock levels, a customary January condition resulting from bigger orders placed by companies in preceding months, which subsequently reduces order sizes in January.

Sales trends aside, fuel sector officials are alarmed by the reports of possible fuel tax increases. Fuel sales will inevitably decline, the state will lose rather than gain tax revenues, while illicit fuel trading activity will rise as consumers seek cheaper fuel stations, officials warn.

Between 2010 and 2016, auto fuel sales fell by 34 percent and heating fuel demand plunged by 53 percent following two major tax hikes for fuel (special consumption tax and VAT). During this period, between 3,500 and 4,000 fuel stations went out of business, roughly 10,000 ot 12,000 jobs were shed, not including several thousand indirectly linked job losses, while the market was flooded with provisions for bad debt worth millions of euros.

Meanwhile, fuel smuggling practices have remained virtually untouched. An “inflow-outflow” data system legislated by a preceding administration back in 2012 with the objective of tracking petrol station fuel purchases and sales is not yet fully operational. Also, a plan to fit GPS systems onto fuel trucks as a means of monitoring their moves has not been completed. Illicit trade for marine fuel is rampant.

 

 

Fuel tax hikes being contemplated despite hefty existing rates

Despite the already burdensome tax imposed on auto fuel, representing about 70 percent of prices at the pump, the finance ministry is considering a further increase.

At present, 93 cents of the 1.329 euros – the national average – required to purchase a liter of unleaded fuel constitute fuel tax, one of the highest tax rates in the EU.

Greece already ranks among the EU’s top eight member states in terms of special consumption tax (EFK) imposed on unleaded fuel, which amounts to 67.8 percent. Greece also imposes the EU’s third highest VAT rate on unleaded fuel, this being 23 percent.

Although the pre-tax price of unleaded fuel in Greece ranks fifteenth in the EU-28, it ends up being the eighth most expensive once taxes have been added. Unleaded fuel is more expensive in Greece than it is in countries with far more robust economies, such as Germany, France, Austria, and Luxembourg.

A fuel consumption reduction and increase in illicit fuel trade will inevitably result if the finance ministry goes ahead with its plan to increase fuel taxes, sector pundits have warned. Also, the Greek state will ultimately suffer a decline in tax revenues if VAT and EFK tax rates are hiked, as was also the case between 2010 and 2015, they added.

Drivers will start looking for lower-cost fuel stations and fuel smugglers will be given incentive to heighten their illicit activities, sector pundits are anticipating.

To date, no effective measures have been implemented to combat fuel smuggling in Greece. A clear and determined government policy is lacking.

An “inflow-outflow” data system legislated by a preceding administration back in 2012 with the objective of tracking petrol station fuel purchases and sales is not yet fully operational. Also, a plan to fit GPS systems onto fuel trucks as a means of monitoring their moves has not been made.

Meanwhile, fuel consumption in January was down compared to figures posted a year earlier. Auto fuel consumption fell by 9.7 percent, while heating fuel consumption dropped by 7.7 percent.