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The rise of four cents a litre within a week and the government’s inability to chastise the petrol companies for the inexcusable increase, has left the opposition parties raving and ranting that the Trade Minister should impose a cap on pump prices.
Although it is the consumer who is paying for the hike, alleged by the cartel of oil companies that it is tied to worldwide crude price increases, the parties are avoiding making any more fuss for the simple reason that a higher retail price for petrol will earn the state more tax revenues, hence ensure civil servants’ wages are paid, and on time.
This follows the recent revival of 10-year passport issues, when a year ago the government only produced 5-year versions, simply to secure a fast source of cash. The same way, the Ministry of Transport said this week that motor circulation licenses need to be renewed until the end of March, but offering a “flexible” plan for 3-6-9- and 12-month permits.
Similarly, the investment-for-passports scheme that raised EUR 3.3 bln for state coffers in the past three years, once again generated funds to pay for the public sector wage bill, still ridiculously high for what it offers, and despite the government reneging on its pledges and resuming hiring in the civil service.
During the past year, crude prices have seen volatile fluctuations, dropping in March to $25-30 a barrel, levels unseen since 2003, but ended the year near the year-ago level of $52 a barrel, with analysts not expecting a rise higher than $60 in 2017.
Pump prices in Cyprus did not fluctuate in a similar pattern in the past year. Quite the contrary, the price of retail petrol may have dropped by a handful of cents, only to come back up again to present levels.
A higher fuel cost has a direct impact on the pockets of businesses, especially SMEs and self-employed professionals (plumbers, electricians, etc.) who are passing the cost on to the consumer, who is once again called to burden the increase.
Unfortunately, trade unions are deliriously happy that petrol prices are not coming down as they benefit from a wage indexation system linked to the cost of living allowance (CoLA), which no one wants to abolish for fear of upsetting workers, primarily civil servants, semi-government employees, bank staff, etc.
What the government has failed to realise is that by allowing such “minor” costs to impact the needs of businesses, it is simply allowing the economy to remain uncompetitive, while higher fuel prices are an important factor to fly tourists to the island, who also think twice about renting a car because petrol is expensive now.
For the time being the government and its key decision makers are basking in the sunshine of record tourist arrivals, but once holidaymakers from Britain and Russia, who account for more than 60% of all arrivals, decide to seek other destinations for their vacations, it may be too late, as we would have once again priced ourselves out of the market.
Petrol pricing is an integral part of factoring the cost of doing business or holidaying in Cyprus. Government officials should not allow oil companies and trade unions to tread all over them.
