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Unrest in Egypt May Have Impact on Fuel Prices in Georgia

Written by Madona Gasanova, The FINANCIAL

25/08/2013 20:00 (234 Day 22:33 minutes ago)

The FINANCIAL -- The prolonged unrest in Egypt is expected to have its impact on gasoline prices in Georgia. Oil consumption dropped in Georgia in the first quarter of 2013 in comparison with the same period of last year.


“The political instability in the Mediterranean basin always had a significant impact on oil prices. On its side it affects the price of oil products. Georgia imports all fuel products, so it is fully dependent on changes happening on the international market,” said Levan Gogichadze, Head of the Marketing Department at Unigroup.

“Making predictions is difficult given our current market conditions. The small volume of consumption of our market does not give us any bargaining power  over global  market. The local competitive environment also plays an important role. The fuel price on the international market and domestic conditions will determine the decrease or increase of fuel prices in Georgia. Exchange rates of GEL to USD are also a vital factor,” Gogichadze said.

Meanwhile the bloodletting continues in Egypt. While criminals take advantage of the political chaos and ordinary Egyptians arm themselves, international experts continue to discuss whether this will cause a hike in oil prices.

While Egypt is not an oil producer, its control of the Suez Canal makes it a major player in the business of the world’s fuel supply. 

Hundreds of thousands of protesters have gathered in Cairo against President Morsi, who was sworn in in June 2012. Former President Hosni Mubarak was ousted in 2011.

There were 62,921 tons of gasoline and diesel realized by LUKOIL in the first quarter of 2013. The figure was 84,378 tons in the same period of 2012.

Lukoil imports petroleum and diesel  from Bulgaria, where the product of European standards (Euro 5) is produced.

“Fuel price and its structure is a very complex issue, and consists of several components. The main component is, of course, the oil price, which is determined by the international market and quoted on the Platts European Marketscan. The cost of transportation, excise tax, VAT - the company’s distribution and overhead costs, and the company’s profit margin are also added to the equation,” said Nino Jibladze, Vice-President at Gulf.

“Price volatility mainly depends on oil price fluctuations, but as oil price is quoted in the international market on a daily basis, and imports, of course, are not carried out every day; the company makes mark-ups change on the basis of the self cost of its reserves. It is a common practice in the world and Gulf also uses this methodology,” said Jibladze.

Gulf imports its products from Greece, Bulgaria, Romania (Premium, Euro Regular and Regular); Euro diesel is imported from Israel and diesel - from Russia.

Total statistics of fuel import in Georgia in the first half of 2013 have shown a reduction. The figure was 157,715.2 tons in 2013 down from 170,730.1 from the figures of the first half of 2012.

Lukoil offered the lowest price per litre of fuel in May 2013. A litre of Euro Super cost GEL 2.15 and Premium Avantgarde - GEL 2.10. Drivers were charged GEL 2.33 for Euro Super and GEL 2.28 for Premium Avantgarde till 18 October, 2012. Prices have not been fixed since that time.

Georgian oil importers have been criticized by members of the Georgian Dream party and its leader, the current PM, for artificially increased prices and cartel agreements.

Over 90% of respondents questioned by The FINANCIAL, stated that they believed in the pre-election promise of Georgian Dream and expected sensitive (GEL 0.50) reduction in prices.

Presently, over 80% of respondents expect further increase of fuel prices, backed by the oil importers with the current unrest in Egypt.

The remaining 20% are expecting the fuel cost to remain stable. Their expectation is motivated by the upcoming elections due to which politicians will try to maintain price stability so as to gain votes.

The FINANCIAL requested fuel price predictions also from Wissol, Rompetrol and SOCAR , but none of them responded due to the absence of staff qualified to answer such questions.



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