Fuel prices to go up after government measure expires

The government has announced that it will end the emergency support measures for households and businesses – aimed at alleviating the strain from soaring inflation – by the end of this month; including the measure reducing consumption tax on fuel.

Back in April, the government had decided to renew the relevant decree up until the end of June. Though the bill it had sent to the House provided for a 50% reduction of the consumption tax, MPs on the House Finance Committee decided to up the reduction to100%.

Despite the Attorney-general advising the President to refer the law back to parliament or the Supreme Court, Nikos Christodoulides eventually decided to keep it as it was, as the entire burden of the increase would have been shouldered by consumers until the referral was examined.

The Finance Ministry’s Permanent Secretary, George Panteli, voiced the government’s intention to withdraw the measure earlier this week, saying that an analysis showed that fuel prices have dropped back to pre-March 2022 levels – when it was first introduced – and so there is no reason to continue.

InBusinessNews interviewed the CEOs of Petrolina and Staroil, Dinos Lefkaritis and George Petrou respectively, the first question being, how are they expecting the prices to go in the next few months.

“No one can predict that,” said Lefkaritis. “Fossil fuels is a difficult sector to predict. We are an island, unfortunately we import and we are affected by the refineries’ decisions in other countries.”

Petrou agreed that Cyprus’ prices are affected by international developments. But he added, “Following Saudi Arabia’s announcement that it will reduce oil production, there was a slight increase for two to three days. But then it returned to previous levels and was not particularly affected,” said Petrou. So he said there may be a crisis abroad, but for the time being it hasn’t affected Cyprus’ prices.

“We are a small market; we can be impacted but we don’t create an impact,” he added.

Petrou believes that locals are not going to be seriously affected by the 8 cents per litre hike. “People – so far at least – have not shown that they are afraid to fill up their tanks. They are driving as much as they drove before. I don’t believe the average consumer, who purchases 40 litres, will be affected by the increase. But a slight reaction is to be expected,” he said.

As regards businesses, Petrou says the price hike will affect their spending; especially those with vehicle fleets. “Large businesses spend €100,000-€200,000 a month on fuel. We are talking of a 6% increase in fuel prices, which is going to have a significant impact on businesses,” he pointed out.

According to Petrou, around 50 million litres of fuel are consumed a month in Cyprus, which means €4m in monthly revenue for the state. “If the state was to clamp down on people filling up in the occupied areas, then the revenue would be much higher,” he concluded.