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The hydrocarbon association, which is run by people from Kastrati, explain why the price of oil does not fall in our country

2022-08-06 10:42:42Fokus SHKRUAR NGA REDAKSIA VOX
The hydrocarbon association, which is run by people from Kastrati, explain why
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The price of crude oil on the stock exchanges, the benchmark Brent, has recently fallen to around $94 per barrel, reaching levels before Russia's attack on Ukraine, after which Brent reached as high as $130 per barrel (see chart Brent indicators at the bottom).

In the domestic market, oil is currently trading at 221 Lek per liter, from about 190 Lek per liter at the end of February, before the war started, although the Brent index is at the end of February levels. Since the beginning of March, the ceiling price of oil, gasoline and gas is set by the Transparency Board established by the government, based on a formula that takes into account the costs of purchasing the product, taxes, administrative expenses and a profit margin. The price of oil in the country has fluctuated strongly during this period, up to a maximum of 260 ALL per liter at the beginning of March, but it has never fallen below 217 ALL per liter (see the graph: Progress of retail oil prices in the market local).

The non-decline of oil in the domestic market at the same rates as the Brent indicator in the international stock exchanges has created concern among consumers and business associations, who demand transparency and reflection of prices in the domestic market.

Luigj Aliaj, from the Association of Hydrocarbons Companies, also a former partner of Shefqet Kastrati, explained that there are several reasons why the price of oil in the country does not reflect the performance of the Brent indicator, which is the reference for refined oil on international exchanges:

-First, he says, "I have tried to explain dozens of times, that you cannot refer to the price of crude oil and reason that refined oil will increase and decrease to the same extent every time the Brent indicator changes on the Stock Exchange" . Aliaj says that the price of crude oil in percentage has been falling at a faster rate for about two months than the price of the finished product, whose reference is the Platts indicator. This movement at different rates is explained by the changes that took place both during the pandemic period, where many refining refineries were closed and then did not return to work, and by the effect that high crude oil prices brought on refining costs. of the product. In this situation, although the supply of crude oil is high, there are fewer companies refining it, creating imbalances in the market, as the refineries are not able to produce for the needs of the market. Aliaj says that the only ones who gain from the increase in crude oil are the producers, who are the real controllers of the world oil price. The rest of the chain, processors, traders, brokers have the smallest profits when the price increases, as they need more capital to make purchases, while high prices inhibit consumption and negatively affect sales. Currently, the Platts index of refined oil on the stock market fluctuates at about one thousand dollars per ton. as they need more capital to make purchases, while high prices inhibit consumption and negatively affect sales. Currently, the Platts index of refined oil on the stock market fluctuates at about one thousand dollars per ton. as they need more capital to make purchases, while high prices inhibit consumption and negatively affect sales. Currently, the Platts index of refined oil on the stock market fluctuates at about one thousand dollars per ton.

-Secondly, while at the end of February and the beginning of March, the dollar was 106 lek, now it is 114, which has increased the costs per liter, since oil is bought in dollars.

-The third and most important factor is related to the gradual withdrawal of European companies from buying oil from Russia. This has caused the Mediterranean market, which is the main supplier for our market, to have increased transport costs, as the markets have already moved to the Persian Gulf. As a result, the major oil supply indicators not only in Albania, but throughout Europe have changed the supply prices in the existing contract. "This is also verified at customs. From the normal contract, which worked until before the war and before a month, where the price from the suppliers to us as a market was formed by the Platts indicator (FOB[1]) on the day of release + $15 premium, in the last month this has been corrected by suppliers at the Platts price (CIF[2]) +$43-60 Premium” (the difference between the contract change from FOB to CIF is $25-60 per ton). Decision-making must also be quick as the goods are not available for long, as the seller moves directly to the next buyer.

The supplier of the Albanian companies is OMV and it is currently receiving oil from Israel, while previously it received it in the south of Italy, at most as far as the south of Spain. A large part of the refineries in Europe that process Russian oil have been closed. The situation is expected to worsen in the winter, if Europe completely blocks the supply of Russian oil.

Aliaj says that the reason why the Board does not meet is that due to these factors, the formula would result in a price increase. "Intervening in a paradoxical way in the functioning of the market, if it was gathered today, it would be obliged to increase it by 6 lek, based on invoices, documents, contracts, that is, with the real cost".

"At yesterday's Platts/fob price, oil was purchased at 992 dollars per ton, multiplied by the rate of 114 lek per dollar and with a ton of oil having 1118 liters, the purchase price is 101 lek per liter, not counting the premium of 80 dollars per ton. Taxes today are 130 ALL per liter at both levels, reaching the price of 221 ALL per liter. If the premium were to be added, the price today would at least increase by 8 Lek per liter. This is the real situation with accounting and this is the way to make transparency".

This situation is to the detriment of companies, forcing them to use different methods to survive in the market.

"I have clarified several times that this work is not regulated by slogans, it is not the way to attack the market and entrepreneurship, because high prices and inflation always risk overthrowing democracy and the free market. One such is the determination of the price in a concentrated manner".

Aliaj adds that there are only two ways to reduce the price: The first is through the reduction of taxes, which today make up about 60% of the price. Second, who is the benefactor of the public to find a way to bring a new offer to the market, at cheaper prices.

He insists that the Board's intervention in prices leaves no room for companies to maneuver with purchases, since no one buys beyond daily needs, bringing the opposite effect to the market, since prices would be cheaper if the Board did not intervene ./MONITOR

CHART: The price of Brent crude oil on the Stock Exchange (USD/barrel) over the last 6 months.

 

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