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Fuel Prices Keep Rising

Current developments on the Georgian oil market suggest that fuel may soon become a luxury product. Last week, fuel prices rose at all branded stations.

Specifically, prices increased by 2-9 Tetri. As of June 6, at the SOCAR network the price of one liter of super petrol was 2.58 GEL, up from 2.55 GEL since May 22; the price of premium rose to 2.45 GEL from 2.42 GEL. The price of regular fuel increased by 3 Tetri to 2.33 GEL. Prices of Euro diesel and diesel rose by 3 Tetri each, to 2.45 GEL and 2.33 GEL, respectively.

After May 22, the price of several categories of fuel changed at GULF stations, too. Namely, the price of Euro diesel rose by 4 Tetri to 2.49 GEL. The price of diesel rose by 5 Tetri to 2.44 GEL. The prices of super, G-force premium, G-force Euro regular and regular fuel have not changed. The price of super fuel is 2.55 GEL. The price of 1 liter of G-force premium is 2.37 GEL, G-force Euro regular costs 2.30 GEL and regular fuel is 2.25 GEL.

As for other fuel networks: at Lukoil network the price of Euro super is 2.50 GEL, up from 2.44 GEL on May 22. The price of premium Avangard rose by 9 Tetri to 2.33 GEL. The price of Euro regular rose by 6 Tetri to 2.20 GEL. The price of Euro diesel rose to 2.30 GEL from 2.28 GEL. It is nearly the same situation at Wissol and Rompetrol.

Georgia has no oil product reserves. Consequently, fuel prices depend on international tariffs. Surprisingly, the pricing has no relation with changes in international oil prices. For example, over the past three weeks, oil prices are declining on international markets, but in Georgia, prices increased. In general, the price of a barrel declined to 65 USD on June 6, but its price was 150 USD in 2008. In 2008, fuel prices were not so expensive in Georgia. Over the past 15 years, there have been many complains against oil product import companies. As a rule, our society and civil sector point to violation of competitive principles and existing cartel collusions on the market.

By instruction of the Georgian Prime Minister in 2015, the Competition Agency explored oil market developments in 2008-2014 and exposed a number of violations and imposed a total of 55 million GEL in fines on them. However, the companies appealed the decision and won. In 2018, the Competition Agency conducted a new audit and imposed only 3 million GEL in fines on oil product import companies.

According to Competition Agency, a number of accusations were removed against the companies, referring to frequent revisions of the legislation in 2012-2014 and a lack of facts that would prove the initial conclusion of the agency.

The fines shrank by 18 times, and there is an unclear situation in terms of the competition agency’s unqualified report in 2015, when it was chaired by Giorgi Barabadze, and in 2018, under the control of Nodar Khaduri. The reports significantly differ from each other. It is unclear who is responsible for this huge difference between the two reports in the three-year interval.

Arbitrariness reigns on Georgian oil market. Oil product import companies benefit from a lack of state regulations, and the situation may worsen on the international market and fuel prices may rise. As a result, the situation in Georgia will be aggravated even further, and fuel prices will surge.

After an interval of several years, the USA plans to introduce new economic sanctions against Iran. President Donald Trump unveiled these plans on May 8, and noted that the US was withdrawing from the Nuclear Program Agreement with Iran. US withdrawal from the nuclear agreement and the introduction of new economic sanctions will affect oil prices. Economic sanctions in 2012-2015 limited Iran’s oil imports and made it more expensive on the global market. After the Iranian oil supply increased, fuel prices dropped, but according to international analysts, Trump’s decision will influence oil prices. Analysts do not rule out that the price per barrel may hit 100 USD. According to various indicators, today Iran exports 1-3 million barrels of oil a day, and the cessation this volume to global markets will surely affect oil prices.

Experts forecast that oil prices will increase on the international market in the near future, and this tendency will be automatically reflected on Georgian market. Oil product importers ignore state supervision services, and fuel prices are expected to reach new highs in Georgia

By Merab Janiashvili
Economic Analyst
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