The government Industry Minister wants to reduce petrol prices.
It was back in September that the Industry Minister Jose Manuel Soria met the large oil companies that dominate the oil industry in Spain; Repsol, Cepsa and B.P. His purpose was to express his concerns at the commercial profit margins made by these companies in comparison to the gains being made elsewhere throughout Europe.
At first glance, it might appear to seem strange that the Industry Minister felt it necessary to talk with the oil companies when statistics show that although the price of petrol rose 37% and diesel 46% to the end of last August (shortly before his meeting) the price of petrol in Spain was only the 16th most expensive out of the 27 European countries measured. However, when you strip away the taxes that governments add to petrol you end up with the price that is charged by the oil companies and it is this that caused him alarm. Before taxes petrol in Spain was the second most expensive in Europe. Only Denmark was more expensive. Therefore Jose Manual Soria was looking to understand why the oil companies felt it was justifiable to charge so much more than the European average price. The government announced in August/September last year that oil prices were a major contributory factor to the inflation rate at the time of 2.7%
As a result of these meetings several proposals were discussed by the government. Six months on something has been done but will it really have an affect and if so how quickly?
The oil companies usually have a contract with petrol retailers to sell their petrol under contract for a period of three years. The government has now changed this to a 1 year contract but with the option to renew for a further two years. The idea is to increase competitiveness in the industry. Also, the oil companies will be prohibited from ‘recommending’ the selling price.
The Deputy Prime Minister, Soraya Saenz de Santamaria announced that the opening of new petrol stations, especially in or near industrial parks and commercial centres will be made easy, speeding up the potential for new players to enter the market.
With the big three operators accounting for a whopping 63% of petrol sales in Spain they are, apparently, going to be restricted in opening new outlets where they already have control of the market.
However, with huge domination will an increase in competition just lead to a short term price war by the large companies until new competition is extinguished and the status quo is resumed?
Since the government announcement the Comisión Nacional de la Energía published a report showing that there appeared to be suspicious practices regarding the prices of both petrol and diesel in operation which does not give a lot of comfort as to the practices that will follow this recent change in the law.
The Government itself is not really in a position to reduce its taxes on petrol because of its obligations to adhere to austerity measures being dictated by larger European economic powers. However, it is not only the petrol companies the government needs to consider in the pricing of petrol. The devolution of power to the local autonomous regions in Spain over numerous years has seen an increasing loss of power and control at central level. One of the powers regional governments have acquired and who will be clearly less worried about inflationary pressures and national economic factors is the ‘centimo sanitario’. This ‘health centimo’ is an additional tax regional governments can put on petrol. Although, it seems to be an environmental tax different regional governments apply this tax in different ways. It is popularly known as the ‘centimo sanitario’ but the reality is it can be as much as 4.8 centimos. Some regional governments do not add it at all while others tax the full amount. This can lead to substantial differences in petrol or diesel prices throughout the country and there hasn’t been any announcement asking regional governments to review what they are currently charging or coming to a national consensus as to the level charged. In fact some regional governments are reviewing what they are charging with a view to an increase.
We will have to wait and see if this policy is the national government playing to the gallery and popular discontent as to the price of fuel (amongst many other everyday necessities) or there is a real intention to make the life of the motorist and the businesses that rely on road transport easier in these difficult economic times.
This article was kindly provided by Jeremy at Car Insurance Spain
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