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Kurt Sansone
The international price of fuel oil used for generating electricity in the Marsa and Delimara power stations for November 2004 is at par if not lower than the cost of fuel oil in November 2003.
Fuel oil constitutes 59 per cent of Enemalta’s total fuel bill.
The alarming statements by various Government ministers over recent months that the increase in the price of oil was going to have a catastrophic impact on Enemalta’s finances turn out to be misleading. To the extent that government ministers including the Prime Minister may not be aware of Enemalta’s real cost to import fuel oil.
Investigations carried out by MaltaToday reveal that the bulk of Enemalta’s oil importation, refined medium and high sulphur fuel oil for firing up power stations, has not experienced any significant fluctuation in the international market despite the meteoric increase in the price of crude oil.
The high price of crude oil is Government’s justification in last Wednesday’s budget for the introduction of a 17 per cent surcharge on water and electricity bills to cover what is purported to be Enemalta’s additional fuel burden for 2005, calculated at more than Lm16 million over this year’s bill.
The price per barrel, often quoted by ministers and the media, including MaltaToday, over recent months has always been US Brent Crude oil. Enemalta does not import crude oil but refined oil products such as diesel, unleaded petrol, kerosene, aviation fuel and fuel oil.
According to Enemalta’s annual report for 2003, “the high and medium sulphur fuel oils used at the power stations account for around 59 per cent of the total imports.” Fuel oil is the corporation’s major financial outlay in terms of petroleum purchases.
The November oil bulletin published by the European Commission clearly shows that the international price of fuel oil for November 2004 is on par if not lower than what fuel oil cost in November 2003. The price of fuel oil remained relatively stable in 2004 despite Brent Crude inching up and temporarily shooting above USD55 a barrel in October this year.
The EU bulletin drawn up by the Director General for Energy and Transport quotes the spot prices as they appear in the Platt’s Oligram for various oil products such as fuel oil. It also calculates the weighted average of consumer prices for petroleum products in the 25 EU Member States. The latter table clearly shows how the price of high sulphur fuel oil in November 2004 is significantly lower than the price in November 2003 while that for medium sulphur fuel oil is today on par with the price in 2003.
Experts argue that the price of refined oil products does not necessarily have a direct correlation with the price of crude oil. The international price of diesel and unleaded petrol has shot up dramatically between 2003 and 2004 almost on the same lines as the price of crude oil. But fuel oil has not.
The relative price stability of fuel oil in 2004, coupled with a favourable USD exchange rate means that Enemalta may very well be importing its fuel oil at prices less than those it paid for in 2003.
Within this context it is unclear how Government calculated the additional losses it said Enemalta was going to suffer because of the rise in crude oil prices. In August when Brent Crude was selling at USD45 a barrel the corporation was said to have suffered an additional loss of Lm3.1 million. By 14 October when crude oil stood at USD53 a barrel, Government ministers were saying that Enemalta was experiencing additional losses to the tune of Lm5 million. It was on 24 October, when crude oil touched USD55 a barrel that Prime Minister Lawrence Gonzi dished out the figure of Lm14 million to quantify Enemalta’s additional financial burden. According to Budget 2005, Enemalta is expected to pay Lm48 million for its fuel oil, an increase of Lm16 million.
These losses do not tally with the information coming out of the Economic Survey for 2004 and which was presented alongside the budget by Gonzi. According to the Survey, Malta’s total fuel import bill between January and September 2004 increased marginally by just Lm2.2 million over the same period a year earlier. The Economic Survey gives no indication of the exorbitant additional fuel bills Enemalta is said to have been paying because of the rise in crude oil prices.
The situation raises various questions about the way Enemalta is purchasing its oil requirements and how the corporation is calculating its losses. And with consumers expected to pay a hefty surcharge of 17 per cent on their utility bills as of 1 January 2005, it is unclear whether the surcharge is there to cover the corporation’s inefficiencies rather than the supposedly increased fuel bill to run the power stations.
kurt@newsworksltd.com
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