The fuel market cartel

Greece is an expensive country compared to others in Europe. From housing to food and from services to interest rates, Greeks pay more than French, Italians and Germans, although the former’s per capita income is some 30-40 percent lower. This fact is also reflected in the country’s higher inflation rate, 3.5 percent and 3.2 percent respectively in the last two years, against averages of 2 percent and 2.1 percent in the eurozone. But why is this so? One explanation is that in Greece the cost of production is high, due to low productivity, as the Bank of Greece argues. It is to the credit of the present government that it has not fallen back on such easy interpretations but has looked into the key parameters of competition, exploring to what extent the markets for goods and services are being held hostage by cartels. It was under this government that the Competition Commission for the first time made specific interventions into the sectors of supermarkets, dairy industries and, most recently, the fuel market. The heavy fine on supermarkets may have not been paid, the leaders in the fresh-milk market may, undaunted, continue to sell at 1.20 euros a liter against nearly half that price elsewhere in Europe, and the Competition Commission’s report on the fuel market cartel may have been nicely worded so as not to upset the country’s two refiners, but the substance of the matter is that the market has begun to be controlled, the oligopolies have started feeling that excessive profits are being questioned and consumers are hoping that the government will protect them. I was telling an economy minister the other day that after the fresh-milk market, the government must push the Competition Commission to investigate other goods markets as well, where cartels are dominant, such as those of frozen foods, beer and refreshment. «You are right, but you must know that the most blatant cartels are in fuels and cement, where each market is dominated by just two enterprises,» he replied. It is therefore encouraging that the government has come to grips with the competition problem and has instructed the Competition Commission to look into the fuel market. The Commission found a complete lack of transparency in how fuel prices are determined and proposed specific measures for liberalization, including facilitating imports. It is here that most questions and uncertainties emerge. To be blunt, has Development Minister Dimitris Sioufas the guts to grapple with the refineries, or will the entire force of the intervention be spent just on gasoline stations? The country does not import a single liter of gasoline, due to legal barriers designed to preserve the hegemony of domestic refiners. Sioufas repeated that Greece has the cheapest gasoline in the old 15-member EU. He forgets that this is exclusively due to low taxation. As the Competition Commission pointed out, Greeks would indeed be paying the most expensive gasoline and diesel, even up to 105 percent higher than the 15-EU average, were it not for the low taxation. So, Mr Sioufas, your statement does not show you are resolved to grapple with the cartel. May we be refuted.

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