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What is happening to oil traders? The increase in prices and their control by the Board leaves them at a loss

2023-11-25 13:42:34Biznes SHKRUAR NGA REDAKSIA VOX

What is happening to oil traders? The increase in prices and their control by

For the first time in 2022 there are no oil trading companies in the ranking of the largest by profits, although they dominate the list by turnover.

Historically, wholesale and retail oil trading is one of the least profitable activities in the country in terms of profit rate, but in 2022, most of them have resulted in loss, or minimal profits.

Operators explain this development with several factors.

-First, the market took a hit at the beginning of March, after Russia's attacks on Ukraine, raising prices on exchanges and forcing operators to change sources of supply, with increased costs.

Prices in the local market jumped up to 260 ALL, from 185 ALL before the beginning of the conflict in January.

INSTAT data revealed that the annual change in the price index of the group of personal services to means of transport was 23% in 2022, up from 6.7% which was the total change in inflation and the second highest expansion of all groups, after oils and fats (24.2%).

Operators explain that the higher the price on the exchange, the less everyone except the producer earns, as the cost of money is added. When the price is low, companies have more opportunities to maneuver with prices, since the reflection of their decline in the stock market is a little slower.

-Secondly, from March, the Transparency Board was created, a government mechanism that set ceiling prices for the trading of oil, gasoline and gas, starting with the calculation of costs from import, passing through customs to the final consumer.

The board said that its decisions were based on the movements of the Platts Mediterranean exchange for diesel, gasoline, as well as the official invoices of the operators.

Operators complained that this intervention, where prices were determined at a frequency of several days, reduced the flexibility of traders to buy on exchanges when prices were favorable.

-Thirdly, high prices influenced the decline in fuel consumption. Data from the Ministry of Finance showed that fuel imports in quantity fell by 9% in 2022, compared to the previous year.

Even in previous years, fuel traders have reported very low rates of return, 0.5-3%, being the least profitable sector in the economy. In the minority market, the rate is slightly higher, reaching 4–6%.

Annual data have shown that operators have increased profit rates in years when the oil price trend is down, as the reduction in the domestic market is slower than in the global markets.

Conversely, when stock prices are rising, profit rates generally do not rise.

According to the operators, the low profit rates in this sector are related to several factors, such as the global trend where the price moves by cents, the high competition in the domestic market where there are many operators, the high number of fuel stations in relation to consumption and vehicles circulating, high cost of investments in deposits.

According to data from the Association of Hydrocarbon Companies, the capacity of coastal deposits is three times more than the real demand, at about 300-400 million liters from Vlora to Shengjin, out of the 60 million liters that are needed.

The Association of Hydrocarbons Companies says that, in addition to other factors affecting the low profit rates, the interventions of the Board have caused the majority of operators in 2022 to result in losses.

Two other factors that have hit traders' profits, according to the Association, are the price difference with the border districts, which causes consumers to buy oil not in Albania, and the smuggling that is done with trawlers, which increases competition and forces importers to lower prices.


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