The petrol importation monopoly

The issue about the virtual monopoly enjoyed by Enemed Ltd – the state company that replaced the Petroleum Division of the old Enemalta Corporation – in the importation of fuel to Malta has been flagged again.

This time it was the Partit Demokratiku (PD) that entered the fray.

About two weeks ago, PD leader Anthony Buttigieg wrote to the European Commissioner for Competition, Margarethe Vestager, and asked her to investigate ‘the almost absolute monopoly over fuel supplies that Enemed holds in Malta and the detriment this may have to fuel prices and to consumers on the island.’

It is indeed incredible that the country has not been able – or willing – to check the state monopoly in the importation and distribution of fuel that was set up by the Mintoff regime some forty years ago when the three fuel-importing companies – Shell, Esso and BP – were summarily sent packing home with a typical Mintoffian excuse.

Since then, governments have come and governments have gone and Malta became an EU member state. However, the situation has hardly changed, save for the recent hiving off of Enemalta’s Petroleum division leading to the setting up of Enemed – a new company, wholly owned by the state – plus other separate state-owned entities that now own the fuelling storage facilities. It seems that successive governments found the income from the fuel importation business was too lucrative to allow – in practice – the private sector to enter into the market.

Today, Malta is the only EU member state where the importation of fuel is practically nationalised and bereft of any competition, with the state deciding what the price of petrol and diesel for the consumer should be.

Plans initiated by the PN government to privatise what was then Enemalta’s Petroleum Division seem to have vanished into thin air and the situation has practically remained as set up by the Mintoff regime so many moons ago.

In his letter to Vestager, the PD leader claimed that Article 37 of the Treaty on the functioning of the European Union (TFEU) obliges member states to ‘adjust any State monopolies of a commercial character so as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of member states’. Buttigieg correctly argued that ‘unlike consumers in other member states, Maltese consumers have no choice and no idea what brand of petrol or diesel they are purchasing.’

The PD leader also insisted that this monopoly is further strengthened by the fact that Government-owned companies own practically all the storage facilities for the local market.                            

It seems that successive governments found that income from the fuel importation business was too lucrative to allow the private sector to enter the market

The letter sent by the PD followed a series of parliamentary questions tabled by Godfrey Farrugia – an Opposition MP said to be representing the PD – to the Minister for Energy and Water Management, Joe Mizzi. According to the Minister, following a complaint made by a Maltese citizen, the EU had concluded that in the current situation there is no breach of Article 37.

In another reply, the Minister assured everybody that the petrol distributed by Enemed is in line with international standards i.e. according to European Norm 228 (EN228) that establishes the quality of petrol that can be sold to consumers.

The Minister refused to divulge the name of the supplier of fuel who won the tender for fuel issued on January this year because of commercial considerations.

From the Minister’s replies one can glean that it could well be that the current situation is not technically in breach of article 37 of TFEU.

I speculate that for this to happen there must be a case where a would-be private importer and distributer of fuel – in competition with Enemed – is refused the use of state-owned storage facilities or is asked prohibitive rates for such use.

Is the ball in the court of the private sector, after all? Or is the prospect of a legal battle with the state – plus the possible complications resulting from the lack of co-operation from petrol station owners – too daunting for anyone to challenge Enemed’s monopoly?

Regulating the rental market

Finance Minister Edward Scicluna made a very telling distinction between regulating rents and controlling them when last Thursday he was asked by a journalist from The Malta Independent for an update on how the Government is prioritising the rental market in view of those struggling to make ends meet.

Today, Malta is the only EU member state where the importation of fuel is practically nationalised and bereft of any competition, with the state deciding what the price of petrol and diesel for the consumer should be

Scicluna spoke of the need to ensure professionalism and protection when talking about regulating the rental market. He was reported as having explained: “Regularising the market is also an objective irrespective of rents going up or not. You have to be fair, but you have to regularise the market. In other words, you need books, contracts, conditions, you need to give notice. You need to protect on the one side that bills are paid and you need to protect the other side too. That is what the agency in the making is trying to reach, it won’t be easy for them but I just hope that it will be better than it is today.”

Somehow the report on Scicluna’s comments in the Malta Independent unnecessarily complicated the issue by claiming that the rental market has been subject to negative media attention ‘because of the explosion of development permits being awarded by the Planning Authority’. 

This is complete balderdash. The explosion in the rental market is the result of supply not being enough to meet demand. Incidentally, it also goes on to show that the alleged thousands of so-called ‘vacant’ residential units are either not habitable or not available on the market.

An increase in available residential units would, of course, stem the lack of supply and so ease the pressure of demand that is pushing up rents.

These are two important issues in the current social problems that Malta is facing. Both are controversial, of course.

Claiming that the negative reports on the rental market are the result of the explosion of development permits belies a lack of understanding of basic economics besides being an appalling example of ill-prepared and amateurish journalism.

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