The Wall Street Journal featured an article at the weekend stating that Greece’s fuel market is divided between the two refineries, namely Motor Oil Hellas Corinth Refineries and Hellenic Petroleum (ELPE), which it says are involved in manipulative and anti-competitive practices. The article said that the International Monetary Fund (IMF) has said that one of the reasons for the high price of fuel to end users in the country is because of a non-existent competitive market
"Hellenic Petroleum, the larger of the two firms, is controlled by shipping and oil tycoon Spiros Latsis, who owns 41.9%. The Greek government owns a 35.5% stake.In reply to the article, ELPE released the following press release:
Messrs. Vardinoyannis and Latsis have high profiles in Greece. Mr. Latsis, whose family also controls Greece's second-biggest bank and a leading property developer, is ranked as Greece's second-richest man by Forbes. His net worth of $2.6 billion puts him just a bit below American television celebrity Oprah Winfrey in the global billionaires' league table.
The report says that "consumers and producers, taxpayers, independent and franchised gas stations" would all benefit from liberalization. But it warned that "owners and employees of the two refineries and their wholesalers" as well as "customs officials" would likely resist change."
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"Commentary on Wall Street Journal article
24/09/2012
On September 22nd 2012, The Wall Street Journal published an article titled “IMF: Lack of Competition Hurts Greek Fuel Market”, extracts of which were reproduced by Greek media. This article, allegedly based on a draft internal report by the International Monetary Fund, starts off by stating that “lack of competition in Greece’s oil-refining industry is costing consumers (in Greece) more than $1 billion a year”. HELLENIC PETROLEUM requested from the WSJ journalist and received a copy of the unsigned report, attributed to the IMF, and strongly refutes, as utterly unfounded, a number of assertions made therein. More specifically:
The assertion that – allegedly – Greek consumers are burdened with a cost of “more than $1 billion a year” is entirely inaccurate and is based on cursory analysis and wrong calculations. The alleged “burden” results from the fact that the analyst used a wrong pre-tax price for heating gasoil, overstated by €367/m3 versus the real pre-tax price. It seems that the analyst used September 2012 retail prices, but subtracted the lower Excise Duty rate, which only applies during winter months and is in fact 7 times lower. This wrong pre-tax price, multiplied by the annual domestic consumption of heating gasoil, returned the erroneous “burden” result of €1 billion a year. In reality, the Greek consumer pays a pre-tax heating gasoil price at levels comparable to the average of the 27 EU countries.
The article also mentions that, due to “lack of competition”, Greek consumers pay too much for unleaded gasoline. The truth is that the high prices result from the particularly high Excise Duty and VAT rate of 23%, which came into effect in 2010. Pre-tax retail unleaded gasoline price in Greece ranges close to the average of Eurozone countries. And this is despite the fact that the distribution costs in Greece are higher due to the country’s geographical dispersion and particularities.
Furthermore, the article makes reference to an alleged lack of competition in the Greek fuel market. This is a recurrent misconception, as, despite the market’s small size, the level of competition in the Greek fuel market is high. More specifically, there are two refining companies in Greece, when in other small European countries (Austria, Bulgaria, Cyprus, Czech Republic, Finland, Hungary, Ireland, Lithuania, Malta, Portugal, Slovakia, Slovenia), only one or no refining company is in operation. In Greece, there are also 19 fuels marketing companies, of which 13 are entirely independent from the two integrated refiners. There are 6,500 petrol stations operating in Greece, accounting for the highest per capita number of stations in Europe, more than double the European average.
Additionally, for a number of years there is no legal provision prohibiting fuel imports by fuels marketing companies in Greece. Low imported fuel volumes in Greece are entirely the result of highly competitive domestic ex-refinery prices and not of an alleged constraint in storage facilities, as claimed frequently.
Consequently, the report which the WSJ invokes and attributes to the IMF includes serious inaccuracies. The claims regarding an alleged lack of competition and profiteering in the Greek fuel market do not stand. On the contrary, some of the “reforms” proposed in the report are more likely to underpin chronic illegal fuel trade practices that cost the Greek State more than €500m in foregone tax revenues each year.
HELLENIC PETROLEUM suffers from such groundless and inaccurate assertions and reserves its right to take all appropriate legal action it deems necessary to protect its reputation."
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