Petroleum product traders are troubled by government thoughts to broaden the eligibility of heating subsidy support so that, besides heating fuel, three new categories, natural gas, firewood and pellets, are also added to the list.
Contrary to natural gas, heating fuel is overtaxed, while the encouragement, through subsidies, of firewood as a heating source does not make environmental sense given the high levels of resulting smog, petroleum industry sources have pointed out.
High levels of smog have been recorded in Greek cities during winters over the past decade or so as struggling households have sought lower-cost heating amid the recession.
Heating subsidies are already limited and barely cover the needs of underprivileged households, petroleum industry officials have noted, fearing their share of the total could diminish if other heating sources also become eligible.
Heating fuel supply for the approaching winter season began yesterday at a level of 77 cents per liter, 2 cents lower than the price level at the close of last season’s trading, in May. Heating fuel prices are forecast to remain low, sources said.
Despite the lower price level, demand was subdued on opening day, yesterday. Many consumers took advantage of last season’s price drop and are already stocked up. In addition, temperatures around Greece remain mild.
Lower natural gas prices are expected to lead to marginally reduced heating costs this winter for households relying on this energy source. On the contrary, heating fuel price levels have so far remained unchanged compared to last winter.
EPA Attiki, supplying natural gas to the wider Athens area, has set a price of 5.1 cents per KWh, effective as of today, down from 5.4 cents per KWh in September and an average price of 5.6 cents per KWh last winter.
The latest price levels make natural gas 42 percent cheaper than heating fuel and 68 percent cheaper than electricity.
A growing number of households are switching to natural gas for their heating needs. Besides a recent sector reform enabling flat owners to freely withdraw from old collective apartment block heating fuel arrangements, as well as a successful gas subsidy program that ended in October but is expected to be relaunched in 2018, households are also turning to natural gas as a result of an uncertainty surrounding heating fuel subsidies.
Though heating fuel purchases for the upcoming winter began roughly one month ago, no details have yet to be provided on this season’s heating fuel subsidy criteria.
The government has already announced it will cut heating fuel subsidies by more than half in 2018, to 50 million euros from 110 million euros. Stricter income and property-based criteria are expected to apply. Consequently, either fewer households will be eligible or heating fuel subsidies will be lowered.
Last year, heating fuel subsidies of 25 cents per liter were offered to eligible households.
A decision by the finance ministry on this year’s level is not expected for some time as the first round of heating subsidies will not be made available until January.
Without a doubt, the additional strain to be felt by households stands to negatively impact the trading activity of petroleum companies.
Heating fuel prices commenced trading today for the upcoming winter season at levels of between 93 and 95 cents (euro) per liter in the wider Athens area, matching last season’s opening price levels.
This time last year, heating fuel began trading at around 93 cents and closed the season at 97 cents.
Sector officials have forecast little chance of any major price changes during the season.
However, anticipated heating fuel subsidy changes, needed as a result of a confirmed cut in national budget heating subsidy provisions from 110 million euros last year to 55 million euros this year, could seriously impact household consumption levels and oil trading company performances.
The finance ministry has yet to deliver a final decision on the new subsidy details. Either subsidy levels or eligibility criteria, or, perhaps both, could change. Last year, eligible households received heating fuel subsidies worth 25 cents per liter.
On the contrary, natural gas is continuing to gain a widening advantage over heating fuel, as highlighted by its deepening market penetration in Athens, Thessaloniki and Thessaly.
Natural gas prices are expected to range between 30 and 40 percent lower than those of heating fuel this winter.
In a letter forwarded to the government, POPEK, the country’s fuel station trading association, has called for a drastic reduction of the special consumption tax (EFK) imposed on heating fuel, noting that a rate hike failed to deliver the desired tax revenue results from this tax while also depriving households of heating fuel.