The Slovenian Government has published a draft proposal for the regulation of fuel prices in 2023 and 2024, which is planned to be linked to annual inflation.
The proposal was published among the working materials for government meetings and includes a new way of creating sales margins for motor fuels.
According to the proposal, the fuel margins might now be linked to the annual growth of inflation, with negligible effects on inflation itself. Changes in the electricity and gas margins have not been included in the material. As a reminder, last year, the previous and current governments’ limited the earnings of fuel dealers twice. Firstly, on 14 March 2022, when the maximum selling price of fuel at all pumps was limited, leading to dealers operating at a loss. The second time, after the election of the new govt. in mid-June, when a new regime for calculating prices of motor fuels outside the motorway junctions was introduced, leading to reduced sales margins.
Currently, (until June) the sales margin for motor fuels and heating oil stands at EUR 0.0983/liter for diesel, EUR 0.0994/liter for unleaded 95-octane gasoline, and EUR 0.08/liter for heating oil. The new proposal by the Ministry of Economy does not provide for a fixed increase in sales margins. Rather, it harmonizes the level of margin with the level of growth in retail prices, with a note proposing a link to the annual growth of inflation, for December 2022 as compared to December 2021.
As a reminder, the annual inflation in this period stood at 10.3% YoY, meaning that the margin per liter of fuel would amount to: EUR 0.1085 per liter for diesel, EUR 0.1096 per liter for unleaded 95-octane gasoline, and EUR 0.0882 per liter for heating oil. Furthermore, according to the estimates by the European Commission for Slovenia, they expect annual inflation of 6.1% in 2023.
If this happens, then the margins in 2024 would amount to EUR 0.115 per liter for diesel, EUR 0.1163 per liter for unleaded 95-octane gasoline, and EUR 0.0936 per liter for heating oil.
Fuel sales margins in Slovenia (Current, calculation based on proposal for 2023 and 2024, EUR)
Source: Slovenian Ministry of Economy, Finance.si, InterCapital Research
The current regulation on fuel prices is valid until 21 June 2023. As such, the new margins could only be applied after this date, but as the Ministry of Economy stresses, the price control plan for 2023 and 2024 is still being prepared for adoption by the government.
As a reminder, the final retail price of fuels is made up of the following: the purchase price of the derivative from the commodity exchange, which is increased by the cost of mixing the biocomponent (in this case, the Mediterranean biocomponent), and the trader’s margin. Afterward, the excise duties, carbon dioxide emissions tax, contribution to energy efficiency, contribution to support the production of electricity in high-efficiency cogeneration as well as from renewable energy sources, and finally, a 22% VAT on all listed items are applied.
Coming back to Petrol, the Ministry only commented on the fact that negotiations for last year’s losses (of which you can read more here) are ongoing. Furthermore, Petrol recently pointed out in a study by the Faculty of Economics of the University of Ljubljana that margins in Slovenia are the lowest in Europe, and with prices similar to last year’s before the Ukrainian war, they do not see a point in further price regulation with limited prices.
Petrol share price (2020 – 2023 YTD, EUR)
Source: Bloomberg, InterCapital Research