The pump prices of diesel and petrol will each be reduced by 4c as from tomorrow, "after a number of transactions have been concluded which will result in a reduction of both petrol and diesel prices", the government said yesterday.

Petrol prices will be reduced from 1.42 to 1.38 and diesel prices will be reduced from 1.35 to 1.31 per litre.

This comes as research conducted by this newspaper shows that, because of its hedging policy, the government has been paying over half a million euros a day more for fuel purchases -since the recent price slump - than it had in 2009, when oil prices were at a level similar to today's.

But, the government said, more reductions will come into effect over a number of months, even before various hedging agreements draw to an end. In 2014, these agreements guaranteed lower stable prices at the pump in spite of high oil prices, the government said.

The government highlighted that this will be the seventh reduction of petrol prices and the fifth reduction of diesel prices under this administration. It was also an agreement that came on the day when the price of oil spiked upwards by eight per cent, Friday, the highest spike in daily oil prices since 2009.

"In 2014 Malta benefited from reduced fuel prices and stability which contributed to a reduction in inflation and further economic growth. This contrasts significantly with the previous administration where in the second half of 2008 oil prices dropped by 51 per cent and energy prices rose by 20 per cent. Today, the Opposition does not have a plan for Energy and did not even take a position on whether it prefers fuel price stability," the government said.

Price reduction 'a joke' - PN

The PN described the government's latest decision to reduce fuel prices by only four cents as a joke.

In a statement issued soon after the government made the announcement yesterday, the PN said that the reduced prices do not really reflect the prices our European counterparts are paying for petrol and diesel.

"Despite the fact that the prices of fuel would be reduced on Monday, we will still be paying the highest prices for fuel in the whole of Europe. It is obvious the government took this decision since it could no longer take the pressure exerted by the Opposition on the government to reduce prices.

"This decision confirms that the Opposition is right when it insists that the prices of petrol and diesel should be reduced," the PN said.

 

Hedging leaves government out of pocket after oil price plummets

But over recent weeks, the government has been losing €508,607 a day as oil prices plummeted in the midst of the government's hedging obligations.

The effects of the government's fuel hedging policy, which froze prices at the pump last May, has not only left Maltese drivers recently paying significantly more for fuel than most of their European compatriots, but is also having a disastrous effect on the public coffers, an analysis of relevant data has revealed.

Today, before yesterday's announcement of an additional 4c decrease, the government is paying €508,607 a day more for diesel and petrol due to the hedging policy when compared to March 2009, when the international price of oil was similar to today's price.

These costs are being handed down directly to the consumer rather than being absorbed by the government, as had been the case in the past.

In all, Malta consumes 39,450 barrels of petroleum per day, according to 2013 data from the US Energy Information Administration. Of that amount, 11 per cent goes on diesel and eight per cent on petrol, according to figures supplied by the National Statistics Office's Malta in Figures 2014 publication.

This means that Maltese drivers, based on 2013 data, use 3,156 barrels of petrol a day and 4,339 barrels of diesel.

Based on March 2009 prices, when the international price of oil was more or less the same as today's greatly reduced levels - when unleaded fuel cost €0.97 a litre and diesel €0.94 a litre, compared with today's respective pump prices of €1.42 and 1.35- petrol is currently 45c more expensive than in March 2009 and diesel is 41c more expensive.

With one barrel of petroleum being equivalent to 158.98 litres, the rest is simple mathematics.

Since petrol is currently 45c more expensive today than it was in March 2009, when oil prices were the same, the government is currently paying out an extra €225,783 a day on petrol (501,740 litres x 0.45c per litre). And since diesel is currently 41c more expensive today than in March 2009, the government is paying out an extra €282,824 a day for diesel (689,814litres x 0.41c).

 

Pump prices March 2009 vs February 2015

Diesel 2009            Diesel 2015            Difference

€0.940                   €1.35                     41c

 

Petrol 2009            Petrol 2015            Difference

€0.970                   €1.42                    45c

 

Consumption

Total barrels per day total:         39,450

Diesel barrels per day:               4,339 (689,814litres, 8 per cent of total)

Petrol barrels per day:               3,156 (501,740 litres, 11 per cent of total)

 

Difference per day

Diesel          €282,824      (41c price difference x 689,814)

Petrol          €225,783      (45c price difference x 501,740)

Total           €508,607