What can the government do to curb rising fuel prices? The National Competition Commission has issued a report proposing 23 measures in both the wholesale and retail markets to increase competition and put downward pressure on prices.
C. Castelló - 15/10/2012 - 12:03
The government has made no secret of its concern over high fuel prices. Hence its announcement at the end of August that it would request a report from the National Competition Commission (CNC) and the National Energy Commission (CNE) on the behaviour of fuel prices, with petrol and diesel at record highs.
Competition's conclusions have already been made public. And the first is devastating: from the beginning of the crisis in 2007 until 2010, the gross distribution margin in Spain has grown by around 20%, both in petrol and diesel. And all this despite "the sharp contraction in demand for fuels experienced since then" and taking into account that it starts from "previous levels much higher than those existing in comparable countries".
The measures are grouped into several blocks: a first group, relating to the retail market, service station networks, supply contracts and retail prices. Secondly, recommendations on the wholesale segment, mainly relating to the operation of the Compañía Logísitica de Hidrocarburos (CLH) and to transport, storage and refining activities.
1. Develop a system of incompatibilities for the governing bodies of Compañía Logística de Hidrocarburos (CLH), which owns the oil pipeline networks in mainland Spain and most of the storage facilities. The CNC explains that this limitation is requested so that no company operating in the refining and marketing of fuels in Spain can exercise control or significant influence over CLH.
2. In the same vein, limit direct or indirect shareholdings in CLH to 5% of the share capital.
3. Impose an authorisation by the regulator on the tariffs of the transport activity, as pipeline networks constitute a natural monopoly.
4. CLH should not be able to make the contracting of basic logistics services subject to the contracting of additional logistics services.
5. Third party access to CLH's transport network will be granted on a first-come, first-served basis.
6. CLH should be obliged to publish and keep up-to-date detailed information on transport capacity at all times.
7. CLH should inform the regulator in detail about planned extensions, improvements or changes to its transport network. This would strengthen control over the development of the pipeline network.
8. Promote the physical connection of pipeline networks in Spain with other countries.
9. CLH should be obliged to facilitate the physical connection to its transport network of all those networks and private storage facilities that so request.
10. Open the storage capacity of refineries located in Spain that is not necessary for the operation of the refining activity or for the maintenance of minimum security stocks to the third-party access regime.
11. CLH must publish and keep up-to-date detailed information on storage capacity at all times.
12. Reservation of storage facility capacity must be made by formal request, with an indication of the timetable.
13. The reservation of storage capacity should entail a penalty in case the capacity actually used is substantially less than the reserved capacity.
14. The regulator should assess the possible existence of storage bottlenecks.
15. Expedite the processing of all necessary authorisations for the construction of refinery facilities.
16. Facilitate the opening of new service stations
17. Urban planning should not place limitations on the number of sites available within the municipality for the installation of service stations. It should not be possible to invoke reasons of general interest to prevent or refuse authorisations for the installation of stations.
18. It should not be possible to grant direct authorisations to undertakings which operate a substantial part of the service stations already installed.
19. Royal Decree-Law 6/2000 on speeding up procedures for the opening of EESS in commercial establishments should be revised.
20. Prevent the duration of exclusive supply contracts of the main operators from continuing to operate as one of the main barriers to entry and expansion of operators. To this end, limit the duration of such contracts.
21. Prohibit retail price recommendations to service station operators by suppliers.
22. Strengthen restrictions on voting and presence on governing bodies in more than one major operator.
23. The Ministry of Industry, Energy and Tourism should complete its service station price information service by establishing rankings of the cheapest service stations in the last week, month or year, in local environments. In addition, it should include additional services provided by the service station, such as hypermarket, supermarket, car wash, convenience store, spare parts shop or other non-oil services.