The Slovenia Times

Govt reintroduces two-tier fuel pricing model

Economy

Ljubljana - Prime Minister Robert Golob set out the first government measure to tackle the cost-of-living crisis on Wednesday, announcing a return to a model where fuel retailers' price margins at service stations outside motorways are regulated while prices of fuels sold along motorways will be liberalised. The new regime will kick in for a year on 21 June.

Oil prices have gone up from EUR 70 per tonne a year and a half ago to over EUR 120, which has not been reflected fully in retail prices, Golob said, adding that Slovenia had different price regimes during this period.

"We had a regime that forcibly introduced regulation of retail prices. That's why we now have millions [of euros] worth of claims for compensation of damages [from fuel retailers]. This regime is totally unsustainable," said Golob.

"Outside motorways the market unfortunately doesn't work. All the providers have almost identical prices all the time. If the market doesn't work a return to retailers' margin regulation makes sense," he said.

The government was looking to find a balance between market prices where "each one of us, the state, retailers and consumers, carry a part of the burden".

Under the new model fuel prices would be similar to those in Croatia, but below those in Austria or Italy. Given Tuesday's stock market prices, regular petrol sold outside motorways could go up to just above EUR 1.70 a litre and on motorways by up to 20% and more.

"We've been looking at how much our consumers can take," said Golob.

The previous government reintroduced regulation of prices of motor fuels in May, less than two weeks after it lifted previous price caps. Since 11 May, the maximum retail price has been set at EUR 1.560 a litre for regular and EUR 1.668 a litre for diesel. Wholesale prices have also been capped.

Golob said the government's position was that fuel companies' claims to be reimbursed for damages as a result of being forced to sell at lower prices were unwarranted, but added that more would be clear after meetings with them.

Economy Minister MatjaĆŸ Han said the government had to act fast as fuel prices affected everyone and the current regulation was causing the state a major shortfall which potential reimbursements to retailers could raise to hundreds of millions of euros by the year's end.

The government will also introduce some mitigation measures on 1 July, which it plans to adopt next week. Golob mentioned a 16% increase in the tax-free amount of commuting cost reimbursement, an increase in the reimbursement of excise duties for public passenger transport providers and a relief for farmers.

Today, the government temporarily abolished a number of environmental taxes, including the tax on CO2 emissions for diesel, petrol, heating oil and natural gas. This will be in place until 17 August.

Moreover, the cabinet abolished contributions for electricity production using high shares of renewables. This will be in place for a year at the longest. It also reduced to zero the energy efficiency duty.

Together with hauliers, the government will start looking for solutions to prevent fuel price increases from spilling over into higher prices of food and other commodities.

Measures to tackle rising food prices are to follow in June and those to deal with the rising cost of electricity and heating in the first half of July.

"There's enough time to take action. These measures will also follow the same principle as for petroleum products, that is predictability for all stakeholders," said Golob.

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