Govt reintroduces price caps on fuels

Ljubljana – The government reintroduced price caps on motor fuels on Tuesday, setting the maximum retail prices at EUR 1.560 a litre for regular petrol and EUR 1.668 a litre for diesel. Wholesale prices are capped at EUR 1.540 for regular and EUR 1.648 for diesel. The caps will come into effect on Wednesday.

A release issued after the cabinet’s correspondence session said the government reintroduced temporary administrative pricing for the two most popular fuels in view of the well-founded expectations of further disruptions in the market of oil products and significant price volatility in response to the planned EU embargo on Russian oil imports.

The Economy Ministry also said the measure was aimed at stabilising the market and prices for the benefit of businesses and consumers.

The regulation imposing the caps requires of companies to continue to sell their goods regardless of the cap on whole- and retail-sale prices. They will thus be eligible for compensation for the damage, to be set by the government once the measure expires.

The maximum retail price was set on the basis of the latest seven-day average representative price of petroleum products for Slovenia as reported to the European Commission in the Weekly Oil Bulletin. The maximum wholesale prices are by two cents per litre below the retail price caps, which the government finds makes it possible to sell petroleum products to small traders.

The regulation on the price caps was published in the Official Gazette today and will come into effect tomorrow. It will be in force for three months, that is by 10 August.

The Economy Ministry gave an assessment of the fiscal impact of re-regulation of prices in the documents released by the government.

Three leading fuel retailers (Petrol operates 318 service stations, OMV 120 and MOL Slovenija 53 stations) estimate the financial damage to their business as a result of the cap on retail prices at about EUR 30 million a month, which does not include the damage in case of a cap on wholesale prices.

In case of price controls and retailer obligation to sell at regulated prices at the cost of substantial damage to business, the price control act provides for compensation. It could cost the state at least EUR 30 million a month, and prices had already been capped much lower from mid-March to the end of April.

The reintroduction of price caps had been hinted at by PM Janez Janša on Twitter earlier today after Robert Golob, the most plausible candidate for the new prime minister, announced yesterday his centre-left government would impose energy price regulation, targetting not just fuel but other energy sources as well.

The outgoing government imposed temporary caps on fuel prices on 14 March, capping the price of regular at the pump at EUR 1.503 and diesel at EUR 1.541 a litre. The measure expired at the end of April, and the government’s decision not to extend it sent fuel prices soaring.

Regular sold at filling stations operated by Petrol and MOL Slovenija outside motorways today cost EUR 1.717 a litre, and diesel EUR 1.862 a litre. OMV Slovenija sells fuel at EUR 1.714 and diesel at EUR 1.856. Prices at service stations on motorways are even higher.