In Georgia, Fuel is Sold at a Profit of GEL 0.82

The lower 2015 price forecast reflects significantly looser global oil market balances over the first half of 2015 compared with last month’s forecast.

Decline in global fuel prices has not yet affected Georgian prices and this subject has become a matter of avid political discussions in the society.

The Consumer  Protection Association of Georgia and the social movement “Protest Against High Fuel Prices” will hold a protest on December 26.

According to the head of the Consumer Protection Association  Beka Kemularia, protests in the country have long matured as the price of motor fuel is  inadequate to a situation on the world oil markets. Just for this reason it was decided  to hold a protest, he said.

They intend to put before the Competition Agency the issue on the need to study the activities of oil companies operating in Georgia.

 “As of December 11, 2014,  the international price of gasoline amounts to USD  547,  this is GEL 1 056 at the rate of  GEL 1.84 per US dollar plus an  excise tax in the amount of GEL 250 thus we get  GEL 1 306. One ton of gasoline is equal to 1 330 liters. It turns out that the cost of 1 liter of gasoline including an excise tax makes GEL 0.98. To this we must add the cost of transportation and sale. According to the company’s financial statements, transport, selling, administrative and fiscal costs per a liter of gasoline amount to GEL 0.10. Plus  VAT – 18%, or about GEL  0.19,5. Ultimately, 1 liter of Premium petrol on the territory of Georgia costs GEL 1.27 and the retail price – an average of GEL 2.09, that is GEL 0.82  or 64%. Such a high percentage of profit does not exist anywhere in the world. This happens only in Georgia,”- Kemularia notes.

According to him, the prices should be regulated by the market, and the companies should decide for themselves what should the value of their products be, but this should be done within the law.

“In developed countries the practice is just the opposite to ours – profit margin on products sold quickly is very low there due to the high turnover of the company, in any case, they enjoy a very high profit. We have claims to local companies, but we have no leverage in order to prevent arbitrariness on the part of the oil business. The 30th article of the Constitution of Georgia states that the citizens of the country are protected from monopolists, cartel deals and redistribution of the market. The Competition Agency should directly deal with this issue. If it finds that the company enjoys  a dominant position in the market, they must be fined in the amount equal to 5% of annual turnover. Such sanctions are provided by law,”- Beka Kemularia notes.

Participants of the rally also plan to file a  claim in the Competition  Agency about rising prices of autogas.

Georgian PM backed the Competition Agency’s position at the Cabinet meeting on December 18th.

“I instructed the Competition Agency to work on this issue and held responsible for the lack of study and control over  petrol prices in Georgia. Fuel prices fell  several tens of percent in the world market. To our surprise, it is not adequately reflected in our market. So, I want the CA in ten days to familiarize the public with what we are dealing. I know that the price of gasoline went down in Georgia today, but it should be adequate and appropriate to the global market “, – Garibashvili said.

CBW talked with leading Georgian oil companies regarding this issue.

Gulf’s head of the public relations department Nino Jibladz said the company has already decreased oil prices for the 7th time by 25-28 tetris this past quarter. She stressed that the Georgian market is free and such talks are absurd.

Deputy director of Lukoil Shavleg Mishveladze said fuel prices decreased twice in December and offered the Competition Agency to hold negotiations and said he would answer all question posed by them.

General Director of Wissol Petrolium Vasil Khorava said the company reduces fuel prices consecutivly in accordance with the global prices.

He said in response to PM’s statement that it takes time for fuel prices to become adequte against the the world prices. Wissol prices reduced  by 10 tetris and this trend will continue, according to Mr Khorava.

One liter of gasoline in Georgia is in the range of 1.98 to 2.18 lari ($ 1 = 1.91 lari) depending on the quality.