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What is a Real Price of Fuel in Georgia?

Why a price of fuel in Georgia does not fall adequately to changes in the international market? Why a halved price on the international market  is not reflected in the  Georgian market? Is the price of gasoline artificially increased in Georgia? Whether we are talking about a pricing policy agreed by companies or Georgian price of  petrol is regulated by the market?

International   prices began to halve in July and in December a price of one  ton of fuel has cut in half. This phenomenon was  due to several factors, including the imposition of sanctions on Russia and resumption of oil exports from Libya’s two terminals. (The above-mentioned terminals were in one-year blockade, as a result, Libya’s oil exports decreased by 75%).

In July (for example, July 10) international  prices looked as follows (dollars / ton) –

Petrol – $ 1022.25;
Diesel (L-62) – $ 879;
Diesel (10ppm) – $ 900,25;
Jet – $ 942,25;

And, as of December 10 prices were cut in half:

Gasoline – $ 576.5;
Diesel (L-62) – $ 564.50;
Diesel (10ppm) – $ 584,50;
Jet – $ 616,5;

In Georgia fuel prices have not reduced adequately to  international. All persons involved in the oil business notes that the internationals prices will have an  impact on prices in Georgia in  a month and a half. Oil importers explain this fact by six-week supply which has been bought at  a price for that period  when international  petrol price was $ 762.75. However, according to our research, the price reduced six weeks ago has not yet reflected in the Georgian market.

Fuel market analyst Beka Kemularia tried to count the fuel price structure and found that in Georgia the price is set as follows: international price  accounts for   60%, the remaining 40% account for  depreciation, transportation, logistics, excise tax and VAT costs, making a total of  GEL 1.22.

In the words of Kemularia, proceeding from  these calculations, the cost of oil products in Georgia at the moment is about GEL 0.40 higher than would have been based on market principles,” – the expert notes.

Representatives of the oil business in Georgia strongly disagree with these calculations.

According to the  CEO  of SOCAR David Zubitashvili, prices of petroleum products have fallen 12 times since September and the current price is fully adequate to the realities prevailing in the international market.

The Head of Public Relations Service at  Gulf Nino Jibladze says that  the company has lowered the price of fuel by GEL  0.28 and this is the maximum possible at this stage, and if the decline in international oil prices continues, fuel prices in Georgia will also continue to fall.

“At this stage there is no way to further reduce prices, as the company has many different costs. In addition, in December a rate of the national currency decreased, and it also plays a role, “- she adds.

According to Deputy General Director of Lukoil – Georgia Shavlegi Mishveladze, except for the actual price of oil, there are other components in pricing – such as excise, VAT, exchange rate, transport, railroad. The notion that international oil prices fell by half, and accordingly, fuel  price should also fall  by half is absolutely untrue, as these figures sometimes do not change. The share of international oil prices account for 60% of the cost of fuel, other factors – 40%. Meanwhile, the price of oil products in Georgia has decreased by 30%, “- said the representative of Lukoil .