The big announcement Prime Minister Joseph Muscat has been hinting at this week turned out, in the end, to be a slight reduction in fuel prices that might save the average household a few tens of euros by the end of the year.

The price of a litre of petrol has been reduced by €0.02 to €1.44, while the price of a litre of diesel remains unchanged at €1.36. Both prices have been locked until the end of the year.

A reduction in LPG prices was also announced, but the new prices will only be locked until the end of September, before the onset of winter drives up demand considerably. The price of a 12kg cylinder – the most popular size in Malta – has been reduced from €18.40 to €17.10.

The announcement arrives in the midst of a European election campaign, and perhaps as a result, it has been hyped up considerably.

At a political activity on Monday evening, Dr Muscat said that the government would be in a position to give “very good news” in the coming days, without going into any detail, and at a similar event the next day, he confirmed that the announcement would be made yesterday morning.

The ensuing news conference was announced with urgency – the media were given just an hour’s notice to gather at the Auberge de Castille at 10:15am.

The announcement was made in the historic building’s courtyard, a venue typically reserved for important announcements and joint news conferences with foreign statesmen, and a series of Maltese and EU flags served as a backdrop for the Prime Minister and for Energy Minister Konrad Mizzi.

The event, therefore, bore all the hallmarks of a momentous occasion, only serving to further inflate expectations which had been building up in previous days. But save for the fact that prices have been locked for the longest period in years, the big announcement concerned developments that are typically announced through terse press releases issued by Enemalta.

For a few euros more

It is hardly a secret that refuelling one’s car can be a considerable expense: the average motorist may easily end up spending thousands of euros on petrol or diesel in any given year.

Nevertheless, a 1.37% price decrease – for petrol car owners – does not exactly translate into a considerable amount, as our tables show.

Motorists whose weekly fuel bill averages €50, for instance, would only end up saving €19.18 until the end of the year, even though they would still spend over €1,700 over the next eight months.

weekly petrol bill weekly savings savings until end of year €10.00 €0.14 €4.79 €20.00 €0.27 €9.59 €30.00 €0.41 €14.38 €40.00 €0.55 €19.18 €50.00 €0.68 €23.97 €60.00 €0.82 €28.77 €70.00 €0.96 €33.56 €80.00 €1.10 €38.36 €90.00 €1.23 €43.15 €100.00 €1.37 €47.95

The price of LPG has decreased more substantially – a 12kg cylinder is 7% cheaper – but the average household will save less on LPG than the average motorist would save on petrol.

Households tend to spend far more on petrol than they do on LPG. Furthermore, the price is locked for a period in which LPG cylinders are hardly likely to be used to keep households warm – thus driving down domestic demand for them.

A 12kg LPG cylinder used solely for cooking is likely to last for weeks in an average home: consequently, few households are likely to save more than €20 before a possible price revision occurs at the end of September.

12kg cylinders used every month monthly savings savings until end of September ½ €0.65 €3.25 1 €1.30 €6.50 1½ €1.95 €9.75 2 €2.60 €13.00 2½ €3.25 €16.25 3 €3.90 €19.50 3½ €4.55 €22.75 4 €5.20 €26.00

‘We are beating the market’

Both Dr Muscat and Dr Mizzi explained that their announcement was the culmination of months of complex negotiations, and both declared that the government was “beating the market” as a result.

Petrol and diesel prices, which were being revised every month, were first locked for three months last October as the result of a pilot project which aimed to provide greater price stability and security of stock for households and businesses alike.

The latest round of three-month fuel prices was announced only last month, but while Dr Mizzi said that it was clear that good prices had been negotiated, the Prime Minister sought to achieve even better rates for petrol.

The process, he said, involved multiple hedges of commodities – on fuel and on currency, to account for fluctuations in exchange rates – over the next eight months. Without such an agreement, he insisted, fuel prices would have gone up.

Dr Mizzi noted that diesel prices are the cheapest they have been in 27 months, while petrol prices are lower than they were in the final year of the PN government. The price of a litre of petrol had been €0.01 cheaper in the last three months of 2013, however.

The minister emphasised, when asked, that no subsidies were involved in lowering the price of LPG, stating that the price was negotiated between the Malta Resources Authority and Liquigas Malta according to existing regulatory mechanisms.

Dr Muscat repeatedly emphasised that “doing nothing was not an option,” and insisted that market prices are set to go up over the next few months.

He also said that the government’s efforts were partly in reaction to the “disaster” it had inherited, arguing that the previous government simply blamed international trends when fuel prices went up.

“The difference is that the government is no longer passive (cass),” Dr Muscat maintained.

The timing of the announcement may suggest an electoral ploy, but the Prime Minister insisted that his party was still the underdog when asked to comment on the price reductions’ effect on the election outcome.

“We are always at a disadvantage... we are underdogs as no political party in government has ever won this election,” he maintained.

It is likely, however, that the fuel reductions will be a key topic in Labour’s upcoming political activities – starting with today’s mass meeting in Cospicua – despite the issue having nothing to do with MEPs’ work.