Commission takes FIA worries seriously

Publication date: 24 March 2009

PRESS RELEASE

Brussels, 24th March 2009
FOR IMMEDIATE RELEASE

FIA club president Carlos Barbosa gets support from Commission President José Manuel Durão Barroso after clubs voicing serious concerns regarding petrol price fixing and economic recovery.

Since last autumn, FIA European clubs, ACP of Portugal and ÖAMTC of Austria have been voicing concerns that the fuel prices at the pump for motor vehicles do not reflect well enough oil price fluctuations, especially downward movements. Studies conducted in various EU Member States all point to a number of competition shortcomings prevalent in the markets for liquid fuel products used for road transport. The FIA has been calling on the European Commission to tackle this issue.

“The answers received from the Commission so far have been hardly satisfactory” said Carlos Barbosa, President of the Automóvel Club de Portugal. “The issue of fuel prices is far too important to be buried in a bureaucratic swamp. The issue cries out for a quick and rigorous reaction.”

Moreover, the FIA, in a complaint to the European Commission about the lack of transparency in the fuel prices formation, called on the Commission to investigate and study the market.

In response, the Commission launched a comprehensive survey examining the competitive situation in Europe’s oil sector (addressing oil and oil products, mainly refining, wholesale, distribution, retailing). The identification of market failures impeding the functioning of an open and competitive EU-wide market could result from this study. This survey is however not to be concluded before the end of 2009.

Welcoming the opportunity to discuss the issue with President Barroso, Carlos Barbosa underlined the serious attention that he gave to the FIA’s concerns.

“The meeting helped both sides to get a better understanding of the issue. We got from the President of the Commission the assurance he would follow the matter very closely, in order to stop any anti-competitive behaviour as soon as possible” said Barbosa.

Economic recovery needs serious investment in Europe’s road network

Carlos Barbosa also used the occasion to emphasise to José Manuel Durão Barroso the potential for recovery to be realised by investing in Europe’s road network. In Mr Barbosa’s view, the allocation of 500 million euro for the Trans-European Transport Networks, out of a total of 200 billion euro of the European Economic Recovery Plan was totally insufficient.

Werner Kraus, Chairman of the FIA Eurocouncil, wrote in February to Mr Barroso asking for more funds to be allocated to the construction and maintenance of road infrastructure. These funds are needed especially since the bad condition of the European network and the existence of many bottlenecks adversely affect road safety and are  the cause of much congestion, unnecessary loss of time, excessive fuel consumption and CO2 emissions. The additional investment would also support the efforts to refloat economies and create jobs, while investing in the future wellbeing of European citizens.

For more information please contact: Sinziana Gille - Tel. +32 2 282 08 16

ENDS
 
Notes for editors:
The Fédération Internationale de l’Automobile (FIA), the world’s leading motoring organisation, represents via its affiliated members, national motoring and touring organisations over 100 million motorists worldwide and 34 million motorists in the European Union. Europe’s motoring and touring organisations have as their highest priority to make mobility more sustainable, i.e. more reliable, cleaner and safer while keeping it affordable for all.

The European Bureau of the FIA started to address the issue of competition and transparency in the fuel market in September 2008 in a letter sent by the FIA Eurocouncil Chairman Mr Werner Kraus to the European Commissioner for Competition, Ms Neelie Kroes. A second letter about this issue was sent in January 2009. In these letters the FIA pinpointed a deficient competition in the Austrian and Portuguese fuel markets. Of particular concern is the way in which increases in wholesale prices are reflected immediately at the pump, while the recent spectacular drops in prices have taken time to filter through and it is not clear if the consumer has felt the full benefit. Discussions took place subsequently between the FIA European Bureau, its Portuguese (ACP) and Austrian (ÖAMTC) member clubs and Ms Kroes’ services (DG COMP). The FIA asked the Commission to investigate the functioning of the Austrian and Portuguese fuel markets. The results from this enquiry should allow the concerned Member States to take action to reinforce the competition in the specific markets.

The competition situation in Portugal was investigated by lawyers of the Portuguese motoring club ACP. The results were sent in October 2008 to Commissioner Kroes. In 2008 the Portuguese Competition Authority (PCA) delivered a public report on the fuel market in Portugal, describing the formation process of the retail price for petrol and diesel and its connection with the evolution of the crude oil price (Brent), the refined products (Platts) and the euro/dollar exchange rate. The PCA concluded that there was no clear evidence of retail price fixing by the various companies operating in the market. However, the ACP noted in the same year that after having reached record heights the crude oil price dropped by proximally 40% while petrol price dropped only by 6%-11% and the diesel price dropped only by 10%-13%. The ACP carried out a study on the Portuguese oil market published in October 2008. Both the public data gathered by the ACP as well as the reactions of the oil companies operating in Portugal to the increase and decrease of crude oil prices along with the profits announced by some of these companies suggest the existence of rigidities in the Portuguese markets leading to an oligopolistic situation in the Iberian market. This amounts to a cartel between the main oil companies in Portugal and Spain.

A study carried out by the Austrian Competition Authority in July 2008 showed that price increases on the international markets were immediately reflected in the prices at the petrol pump while price cuts always took two to three days to filter through. In discussions with the FIA and the ÖAMTC the Austrian Competition Authority expressed their determination to further investigate the Austrian market and share its findings with its European counterparts.

These issues have also been raised at European level in a high level meeting in Brussels between the competition authorities and the European Commission in November 2008.

Besides the specific problems of the Austrian and Portuguese fuel markets there is a general lack of transparency regarding the pricing base (“spot market”) and its relationship to the consumer price. A free interplay of supply and demand on a free market presupposes that a high level of market transparency can be ensured. The publicly available information does not allow this transparency. The European Commission was asked in this respect to investigate the European oil trading market focussing on the spot market place Rotterdam.

Following the FIA’s correspondence concerning discrepancies in the wholesale fuel price and prices paid at the pump by consumers and the general lack of transparency, the European Commission has launched a study to better understand the functioning of the European fuel markets. The study is planned to be finalised at the end of 2009.