MRA’s veil of secrecy

The exercise carried out by an audit firm for the Malta Resources Authority (MRA) to set prices of gas through a new mechanism has been completed. But when asked to publish this report, MRA said: "The report contains commercially sensitive information and cannot be made public."

Such a reply is totally unacceptable in an open democracy. Why should we, as citizens and consumers, not have the right to know how the prices we pay are set? Why all this secrecy? Perhaps to prove right Adam Smith: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

In March MRA said that "after the price review in February 2012 (it) has decided to suspend the maximum price mechanism until verifications of the costs are completed by an independent audit firm. The exercise is expected to be completed over the next few weeks".

The new mechanism is meant to be more realistic and flexible than the old one but as MRA does not want to make it public it is still not clear what effect it is going to have on the prices that families and businesses have to pay for gas.

In March MRA kept the prices from rising in the days before the 10 March local council elections to avoid a backlash against the governing PN.

In March the 10kg cylinders were to cost more than €16. The 12kg cylinders were to cost more than €19 and the 15kg cylinders nearly €24 while a 25kg cylinder was to rise by €3 to over €33. Suppliers had to absorb these losses hoping that MRA would let them recover their losses later on by not allowing the local prices to go down as much as they go down internationally.

At the end of February MRA had all the new prices ready and was preparing to upload them on its website but government stopped MRA from going ahead.

Gas prices in April increased by 10% on the month before and by 22% on those of a year ago and it is clear that the politics of liberalisation has not given the wished for results and that there is no real competition in this field. He said: "The price of a 12kg gas cylinder which is the most used by families has gone up by €9.20 (88%) from €10.50 in August 2009 to €19.70 in April 2012.

MRA has not bothered to explain all these price increases and accused it of failing in its role as an independent regulator. 

Paying 10.4% more for fuel

The average Maltese consumer's income is 17% less than that of the average European according to the latest Eurostat statistics. This must be kept in mind when comparing the relativity between motoring costs and income in Europe to the same relativity in Malta.

Assuming that a Maltese motorist averages 6,440 kilometres per annum in a 1.2l car, his annual fuel bill will be €5,800, cheaper than the average EU consumer's fuel bill at €6,332. 

But if you then compare the relationship between fuel cost and income per head, you would find that the ratio for the Maltese consumer is 10.4% higher than the average European. The chart shows a select group of EU countries, some of which have a GDP per capita index that approaches Malta's and others that are richer. 

Malta ranks fifth out of nine countries.

The government's comparisons of fuel prices across the EU are fine as far as they go, if the background for your defence is that changing fuel prices reflect the changing price of oil. Brent Crude prices have risen from around $110 per barrel in early January to $123 in early April - that's up by 11.8%.  Mediterranean oil has been slightly higher.   It is the latter, really, that affects the price of fuel in Malta.

Notes:      

1. Price of 1 litre unleaded (Europe Energy Portal)

2. Annual cost of Peugeot 307 1.2l for 6,440 kilometres

3. GDP/capita (PPS - 2010) - Eurostat

Fuel prices, though closely linked to the price of oil, are affected by a variety of other factors. Firstly, there is the exchange rate between the US dollar and the euro, since oil is sold in dollars. Between 1 January and 1 April, the euro appreciated by 3.2%, so that means that oil supplies were cheaper in our currency. Secondly, motorists don't burn oil in their cars, but processed fuel whose price is determined by such other things as refinery costs. Thirdly, there's such a thing as competition or, to be precise, the lack of competition in Malta seeing that we have a monopoly supplier who, by any stretch of the imagination, cannot be considered efficient. 

All these impact the price of fuel in ways that are unknown to the public, and the Malta Resources Authority that regulates such matters, prefers to let the public stay in the dark.

The author is shadow minister of education