The factors behind the domestic rise in fuel prices: the international markets, excises and the exchange rate

The price of fuel in Romania depends on the quotations of the international markets and competition among producers. Another factor affecting price is the fiscal policy and the evolution of the USDRON exchange rate. The price hikes that have occurred since the beginning of the year have been caused by the rising crude prices on the foreign markets since the beginning of the year, Petrom officials said. In Q1 2010, the price of gas on the international markets has increased 7.4%, while the price of Diesel fuel increased 5.5%, they said.

The officials of the company said that Petrom raised the price of gas by 0.7% in Q1 2010, and that of diesel oil by 1%. The domestic rise in the price of oil products is way has lagged behind the rise in oil and fuel prices on the international markets.

"Rompetrol" officials said: "Given the fact that the Rompetrol Group gets all its crude from abroad, Rompetrol Downstream - the retail division of the group, has continued to hike prices in Q1 2010, in line with the rising prices of crude, as well as of gas and Diesel fuel".

Since the beginning of the year, the company has raised the price of its "Efix" gas by 7.15%, and the price of Efix Diesel by 6.45%, after the price of gas and Diesel fuel increased 6.17%, and 11.23% respectively on the foreign commodities markets. Other foreign factors which are outside the control of the company, such as the exchange rate and the decrease of the Brent Ural differential also had a significant influence on the price of fuel".

According to "Petrom" and "Rompetrol", taxes account for around 50% of the price of gas and Diesel oil paid by consumers. The latest increase in gas prices happened on January 1st 2010, when the excises in Euros were hiked. The excise in Euros was increased by 3.6% for unleaded fuel and by 3.2% for Diesel fuel (see chart). In lei, the excise for unleaded fuel increased 18.4% (from 1,629.07 lei/ton in 2009 to 1,929.49 lei/ton in 2010), and the excise for diesel fuel increased 20.8% (from 1,225.4 lei/ton in 2009 to 1,481.27 lei/ton in 2010).

Constantin Tampiza, general manager of Lukoil Romania, said: "The price of fuel increased due to three factors: the hike of the excise expressed in Euros, the depreciation of the leu against the Euro and speculation in the oil market. The price of oil on the international market was completely disconnected from the economic realities and demand for fuel has shrunk all over the world because of the crisis.

Professionals in the oil business are concerned with the increase in prices caused by speculators. The rise in commodity prices is reflected in the higher prices paid by consumers and it affects the economies of all states, reducing the chances for a recovery and an exit from the crisis".

Constantin Tampiza said that in his opinion, every country should introduce measures intended to curb oil speculation, to prevent the economy from having to bear the fluctuations of price. As an example, the general manager of Lukoil mentioned the taxation of windfall profits made by oil producers as a result of increasing oil prices, or the introduction of oil royalties, following the evolution of prices.