Heating fuel hits the market tomorrow at elevated prices

Following the recent ratification of a new round of fuel tax hikes in Greece, heating fuel will hit the market tomorrow at elevated prices, roughly ten percent higher than last October. Natural gas, priced at five cents per KWh for October, is currently the far cheaper option, costing 43 percent less.

Certain consumer categories will be eligible for heating fuel subsidies. However, a new subsidy model’s details will not be known until around the end of the month, when a ministerial decision is expected.

Heating fuel prices, as of tomorrow, are expected to reach levels of 93 to 94 cents per liter in the wider Athens area and even higher in provincial Greece.

This represents an increase of approximately ten percent from a year earlier, when heating fuel was priced at 85 cents per liter in Athens. Last winter, heating fuel prices fell as the season progressed, reaching levels of 70 to 75 cents per liter in April.

Higher special consumption tax (EFK) and VAT rates will come into effect for heating fuel tomorrow. Based on the new rates, taxes will now constitute 54 percent of retail fuel prices in Greece, well above the EU average of 32.1 percent. Making matters worse for local consumers, international crude prices are on the way up following a recent decision by OPEC members to contain the cartel’s daily oil production level as of November.

Most critics believe that a tax revenue increase will not be achieved, despite the heating fuel tax hikes, as a result of the anticipated drop in fuel demand and increase of illicit trade, presumptions based on past experience.

Also, officials have pointed out that demand for heating fuel will remain subdued in the lead-up to this winter period as a result of the current mild weather conditions being experienced in most parts of Greece.  Leftover fuel stocks from last winter at many households will also initially limit demand, officials have noted.

As for the revised heating fuel subsidy plan, details of which are expected at the end of this month, finance ministry officials have said new subsidies will be better targeted. Income and property-related criteria for heating fuel subsidy applicants will not be changed. But a new criterion taking regional weather conditions into account, for greater support to underprivileged groups based in colder parts of Greece, will be introduced. The total subsidy amount to be offered, at 105 million euros for this winter, remains unchanged.


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.

Gains, losses seen in geographical-based heating fuel subsidy plan

Revisions to heating fuel subsidy criteria for households currently being worked on by alternate finance minister Tryfon Alexiadis and his associates are expected to produce both gains and losses for consumers, the objective being to establish a fairer and more focused system.

A proposal already forwarded to the Prime Minister’s office divides households eligible for fuel subsidies into four climate-linked geographical regions. Based on this proposal, heating fuel subsidies will be available for maximum annual quantities per household ranging from 500 to 2,500 liters, depending on the region, according to the proposal.

Eligible households will also be subject to income and property criteria, which, according to sources, will remain unchanged compared to last winter’s system.

A total of 105 million euros will be provided for heating fuel subsidies compared to 210 million euros last year.

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.

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.



Sharp heating fuel sales increase registered in 2015

Data just released on the country’s fuel sales for 2015 have shown a slight decline in auto fuel consumption, down by 46,712 tons compared to the previous year, while heating fuel registered an impressive 43 percent year-on-year increase. Consumption in the heating fuel category increased by 417,210 tons compared to 2014.

Overall fuel sales increased by six percent as a result of the considerable rise in heating fuel demand.

Unleaded auto fuel sales continued to drop amid the ongoing Greek recession. It is believed that the lower prices offered in 2015 helped restrict the decline experienced in the preceding years. A six percent decline in auto fuel sales had been registered in 2014. The drop was limited to three percent in 2015, for sales totaling 2.46 million tons.

On the contrary, auto diesel sales, which proved dynamic in 2014 to register an eight percent sales increase, ended up losing momentum in 2015. Despite the lower prices offered, auto diesel sales increased by just two percent in 2015, to 2.51 million tons.

Heating fuel sales figures definitely provided the sector’s brightest news for the year. The 43 percent sales increase took total heating fuel sales to 1.39 million tons in 2015 from 971,454 tons in 2014.

Early fuel sales data for 2016 indicate that the year has begun slowly with subdued sales figures in all product categories.

Sharp heating fuel demand boost registered in December

The local fuel market ended the year with a considerable boost in demand propelled by a significant increase in heating fuel orders during December, according to business news source capital.gr.

Many petrol trading companies experienced order increases of up to 40 percent in the final month of 2015, which came as respite amid a year of sharp fluctuations, good and bad news, all of which ultimately heightened insecurity, as it has become unclear how much further the price of crude can drop in the international market.

The local heating fuel orders boost in December, especially during the festive season, has been attributed to lower prices and favorable terms offered by competing suppliers.

Heating fuel prices, whose national average was less than 75 cents per liter and under 70 cents in the wider Athens region, have now fallen to levels of four years ago.

Intensifying rumors of limited heating fuel subsidies that could be swiftly absorbed by entitled households also helped boost heating fuel demand.

Although this winter season has been mostly mild in Greece compared to last year, the sudden dip in temperatures experienced around the country during the New Year period also helped boost fuel demand.

Despite the late-year surge, 2015 ended as a subdued year, overall, for the fuel sector. Encouraging signs during the year’s first half were suddenly devastated by the arrival of capital controls in the summer. The restrictive banking measures altered the market’s sentiment and led to a drastic decline in demand. It took until October for the fuel market to regain some sense of balance. December’s boost will certainly offer some improvement to the sector’s overall results for 2015. The sector suffered a bad year in 2014, incurring an overall loss of some 65 million euros.