The FINANCIAL — While crude falls globally as investors focus on a weak demand outlook and OPEC officials hold emergency meetings, Georgian oil importers claim oil prices might go up in Georgia if the national currency – GEL – keeps falling.
Total sales for the 3rd Q 2008 of Eko Georgia were GEL 9,900,182.00. From August 2008 the Company’s price for gasoline was decreased by 45 tetri and for diesel – by 50 tetri. “The reason of the decrease of oil prices is increased production and decreased demand and the fact that investors are investing more money not in oil but in other fields like gold and silver.”
“We are importing oil from Greece. We buy oil in USD and we collect money in GEL,” he added.
For Eko Georgia during and after the August Russian-Georgian war period sales were not increased but decreased, for August minus 18% and for September minus 9%. After the Russo-Georgian war they have had losses only in sales.
“Fuel selling prices are directly dependant on international oil prices and the exchange rate and coming out from both parameters company management will act accordingly,” noted the Managing Director of Eko Georgia.
According to Socar Energy Georgia, the Department of Economic Analysis and PR, all Socar’s strategies and tactics in economics are related to market factors. It is similar in case of tariffs. Soon Socar’s price policy will be the policy of competitive price.
“The price level dynamic on oil products is linked to many factors,” Socar representatives explain. “The first factor is world prices and the exchange rate. Also most important is the condition of the customer, their request and paying ability. These factors may work in various combinations and in various directions. If the other factors stay stable and the oil price reduction dynamic remains, then fuel price will be decreased.”
If the exchange rate of the GEL keeps on falling and nothing changes, then oil price will be increased. “If the decreasing temp of the exchange rate of the GEL outruns the decreasing temp of the world’s oil prices, prices will be increased, and in the other case, we will have a price decrease tendency.”
“Socar, when price fixing, analyses all the aspects and events and only then takes a decision. Even so, this decision should envisage all possible risks so as to be competitive on the market. Oil products, especially the fuel market in Georgia is of high competitive value. Companies like Socar do not have the right to make mistakes.”
“The exchange rate is an important factor for local pricing policy and the significant fluctuations of currency rates will certainly affect this process,” Maia Chikvanaia, Head of Marketing of Lukoil, told The FINANCIAL.
“The international market dictates fuel prices as well. The combination of these two factors is the prerequisite for the final statement of the price. The recent exchange rate and international fuel prices allow us to stay at the current price level.”
“We import fuel from Lukoil Neftokhim Burgas refinery located in Bulgaria. From November 15 we offer our customers Euro 5 standard fuel. These products have significantly higher characteristics than those of the Georgian legislative requirements and have almost no negative impact on the environment,” she added.
Lukoil representative thinks that the GEL depreciation will have no major impact on the Georgian economy.
The war in August influenced Lukoil sales, as well as affecting all industries in Georgia.
“Consequently, our sales in the 3rd Q 2008 were lower than projected. Things have got better now and we believe that we will recap sales before the end of the year. During the most recent period the prices for different fuel products have decreased by 40-50 tetries,” Chikvanaia says.
“During the war in Georgia the economy was near to falling and Lukoil’s sales as well as the sales of every single commercial entity were minimal,” Chikvanaia says.
“Tangible losses if any were to do with the decrease of sales during the war. More important was the stress that adversely affected our personnel that were working 24 hours despite the war’s progress,” noted Chikvanaia.
“We depend on international prices and the risk is sales volumes that would probably be less with the possible increase of these prices. The decrease of the international prices is not considered a risk at all and is actually always welcome,” she added.
“We import Euro products from Italy (API) and economy products from Romania, Azerbaijan. Wissol buys oil in USD and saves money in GEL,” Nino Dgvepadze, Wissol Petroleum Georgia’s Marketing Director, told The FINANCIAL.
The reason for the decrease of oil prices in Georgia is the reduction in world market oil prices. “Our sales did not increase during the war.”
“The policy of our risk management in case of further decrease or excess increase of oil prices is to avoid large price fluctuations, hedge the price risk through derivative instruments,” said Dgvepadze.
Recently Wissol has been reducing oil prices every week. Since August Wissol prices for all fuel products decreased by 50-60 tetries and this tendency is continuing. The very highest price for Wissol fuel was GEL 2.30.
On 8 November Wissol fuel prices decreased by 5-10 tetries on all oil products. Customers of the Wissol First Card had 5% sales per litre of oil.
“If the exchange rate of the GEL does not exceed 1.65 and the decreased tendency of oil prices on the international market remain the same, then our company will keep the same prices,” stated Wissol Petroleum Georgia’s Marketing Director.
Written By Sopho Kheladze