In the last six years, the PN government could have saved taxpayers at least Lm120 million in oil purchases had serious steps been taken in time to use the system of hedging and forward-buying when a barrel of oil was much cheaper than it is today. Government knows that Enemalta has data showing that since 2001, the price of oil has been rising all the time. But government did not take any serious steps to buy oil wisely and lessen the painful impact of international prices of oil on local families and businesses.
Enemalta has data that shows that for every increase of USD15 per barrel of oil, Malta has to spend at least an extra USD100 million every year to buy the oil that it needs. Malta spends less than this if instead of buying oil at high current world prices, it would have taken steps to buy at a time when prices were lower. But since 2001 till last week, the PN government did not take any serious steps to mitigate the painful impact of world oil prices on our families and businesses. In 1999 government appointed a fuel procurement committee to give advice on the best ways to buy oil for Malta’s needs. Advice was given to use the system of forward-buying and hedging to buy oil at cheaper prices. But government ignored this advice and through a fuel surcharge, it simply passed on the higher oil prices to families and businesses.
In November 2005 the price of a barrel of oil was USD55, which is at least USD35 of the current price. All indications since 2001 have been that the price of oil would go higher and higher for a number of reasons: the Iraq war, conflict in Nigeria, the Iran nuclear issue, the value of the dollar and the higher demand for oil by China and India. All these factors have been contributing to the rising price of oil and yet the PN government looked on impotently and took no steps to lessen the painful impact of these prices on the local families and businesses.
High water and electricity bills have been hurting many families, pensioners and businesses because we depend on oil for our energy needs much more than many other countries. Even government’s own official statistics for the last three years show how the cost of living has continued to rise, especially after the introduction of the fuel surcharge and the increases in the price of petrol, diesel and kerosene. The price of these fuel products started rising once the PN government took measures to link their cost to world market prices.
Obviously the Maltese government has no way of determining or influencing in any way the world market prices for oil but government could have taken steps to buy oil at better prices by using instruments that are used in other countries that also operate the free market system. Many private companies around the world use different tools to buy oil at better prices than those obtained in the current market.
Instead of using similar tools, the PN government turned this issue into an ideological and partisan battlecry and refused to buy oil when prices were better. Government has been boasting that steps have been taken to cut waste in public expenditure. At the same time government threw away at least Lm120 million by not buying oil at cheaper prices. Families and businesses have had to pay dearly for this.
It is certainly no consolation that on the eve of a general election, government has now announced that the fuel surcharge will remain stable till June as a result of hedging of oil process by government. This U-turn is too little and too late. The Labour Party has been calling on government to do this for the last nine years but the PN government in its arrogance ignored this demand and simply passed on the higher oil prices onto local families, pensioners and businesses and made them pay at least Lm20 million each year that could have gone into a better quality of life for families and new investment for businesses.