There have been civic protests against the high price of fuels and their low quality over this week. At the same time the global prices have been dropping in a drastic manner. It remains unclear why those are still high in Bulgaria and among the highest in Europe at USD 40 per barrel and down. It requires the interference of the state institutions, but it may be not that simple as it looks.
Vice Premier Tomislav Donchev explained that the state has no refineries or pricing, it doesn’t sell petrol, but it must provide order, transparency and the guarantee of an acting market. That is the problem – the market which theoretically has been free since 10 November 1989. Minister of Economy Bozhidar Lukarski underlined that supply and demand was the formula of the free market. However, it still needs some regulation, as nothing is worse than monopolies – and the Commission for Protection of Competition is the one in charge. Bulgaria suffers the monopoly of its single refinery Lukoil which holds 70 percent of petrol supplies. The rest of the participants comply with its prices even without cartel agreements, simply because Lukoil is the largest and the only one to buy from. The question is why don’t they buy from other refineries outside Bulgaria? That would mean competition and a free market.
Still, there is a long an unknown path, linking the wholesale price to the retail one at fuel dispensers. One can spot the tracks of the production cost per ton there, the excises and state fees, the margins and discounts that form the profit of distributors and traders, the low level of consumption etc. Of course, the raw material is also important – Lukoil works entirely with the Russian Urals oil brand, which contains much more sulfur and requires more expenses for the meeting of the Euro diesel’s criteria. That is why Lukoil is trying to modernize its facilities with USD 1.5 bln., decommissioning its old producing capacities from the 1960s. The exchange with modern technologies will mean a better quality and effectiveness of the production, but it means money.
Experts claim that all factors from the above answer the question why the retail prices of fuels don’t drop with the same pace as the global price of raw petrol, i.e. why a liter of gasoline is still worth more than 1 euro.
Now it’s up to the state to liberalize the market of fuels, to ease the import of oil products and to create the respective product exchange here. That would result in the additional 10 percent reserve for the lowering of retail prices.
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