Georgian fuel price journal
11 November, 2010
Georgian fuel price journal

Usually, fuel prices at Georgian market increase in compliance with the international market trends. However, they do not follow the international trends as eagerly when the price slumps occur. Economic analysts say the reason is the monopolization of Georgian market and lack of petty market players. Fuel market players argue the reason is volatility of international oil market trends and increasing market demand.
Prices on fuel remain unchanged in Georgia as of yet irrespective the past week’s price-hike at international

oil market fixing USD 86-88 per barrel – the highest price during the last two years starting in July of 2008 when the price reached USD 145-147 per barrel. However they most probably will go higher if the international price-curve keeps creeping upward for more than a week.
The problem is that prices for fuel at Georgian market almost simultaneously duplicate the price hike trends but ignore the price slumps. Prices on petrol stands at averagely GEL 2 per liter in Georgia today against the backdrop of USD 80-88 of international oil price and the price was similar GEL 2 in 2008 for example when the oil price reached its peak of USD 145.
Prices for petrol and diesel increased by GEL 0.3 - 0.5 at Georgian market in mid-October in compliance with the sharp price hike at international market. After flickering up and down between USD 70-78 during the year, the international price trend fixed USD 81-83 per barrel early in October.
Accordingly the international price for petrol fluctuated between USD 685 - 713 and the price for diesel - between USD 640 - 675 per ton during September of this year based on PLATT’s data. However, the price sharply increased [by approximately USD 100] to USD 773 and USD 723 per ton of petrol and diesel respectively, which jacked prices up in Georgia likewise, Vano Mtvralashvili, Head of the Union of Oil and Oil Product Importers and Consumers (UOPC), explains.
And by today the price at Georgian market for the super segment of petrol stands at GEL 2. 05 per liter, the premium and regular petrol costs GEL 2 and GEL 1.90 respectively, while the super quality diesel cost equals the regular petrol price actually - GEL 2.
‘Goods in Georgia are getting only expensive and never get cheaper because the basement [of Georgian economy] is not free market principles but the appetite of corruption; and this appetite is the reason petrol prices was GEL 2 in 2008 and stands at GEL 2 today,’ Soso Tsiskarishvili, an economic analyst, told Georgian Journal.
Mtvralashvili finds this argument incompetent. He insists that it is impossible to halve the fuel price today due to currency depreciation risks. 
“Georgian national currency in July of 2008 stood at GEL1.45 against USD1 while it stands as of GEL 1.78 against USD1 today. This is an important part of price-making and how is it possible to cut down fuel price against the backdrop of fluctuation of Georgian national currency?” He asks.
Meantime the bigger part of Georgian fuel market is taken by Azeri fuel imported from the neighboring Azerbaijan by Azeri national SOCAR energy company. However, Azeri fuel is sold nearly in the similar price as the petrol and diesel imported from Romania and Italy by Romepetrol Georgia and Wissol Georgia for instance.  Wissol and Romepetrol branded super segment petrol and euro diesel costs GEL 2.05 alike while SOCAR fixes GEL 2.05 for its equal quality petrol and diesel as well as other products irrespective that transportation of fuel imported by railway from the neighboring Azerbaijan very likely is much cheaper than fuel imported from oversee countries via ships that is acknowledged as one of the most expensive transportation means.
On the one hand Georgian Railway LLC fixes preferential tariffs [approximately USD 12-13 is fixed per ton of cargo transported across 300-400 km to Azerbaijan while averagely USD 20 is fixed per ton of cargo transported on 300 km generally]. The reason is Azerbaijan-bound cargos make 80-90% of Georgian cargo turnover and account for 16-17 million tons per year.
Mtvralashvili plays down the transportation costs as a decisive factor in this case. He assures that difference between transportation of Azeri fuel and fuel imported from Romania and Italy is not as important as it seems actually and that all oil importer companies operating at Georgian market face almost similar expenses including SOCAR Georgia.
“They are similarly taxed and imposed by excise, besides no matter fuel is Italian or Azerbaijani all are sold according to international market price,” Mtvralashvili explained to Georgian Journal. “Besides the product is sold in the proposed prices and that’s the reason the price is not cut down actually.”
Nodar Khaduri, an economic analyst, thinks fuel prices at Georgian market do not diminish due to monopolization of the market plus the market demand. However he acknowledges that the unstable international market prices coupled with the currency fluctuation risks also appear decisive in the price-making policy.
“Entrepreneurs do not know what happens in future therefore they do not cut down prices when the international market prices go down. The similar can be said of currency depreciation risks, and business tries to lay all risks on consumers [via keeping high prices] and they achieve success due to imperfect market competition – there are so few oil product importers at Georgian market that they easily can manipulate the situation,” Khaduri explained to Georgian Journal.
There were more than 50 petty companies importing and trading with the fuel before Rose Revolution, however big market players took an advantage by developing an expansive petrol station networks throughout Georgia and the number of  fuel market operators reduced to 7 including SOCAR Georgia, Wissol Georgia, Romepetrol Georgia, Lukoil, Senta, and Eko Georgia.
“If there were bigger number of petty companies the situation would be different. But petty companies cannot enter the market because they cannot compete with the big market players like SOCAR and Wissol for instance. Petty fry cannot afford to import fuel from oversea countries like Italy and Romania because it demands huge resources [one ship costs USD 3-4 million approximately] and is affordable to big companies alone. To import Azeri fuel bypassing SOCAR is impossible because according to Azeri law SOCAR has an exclusive right on export, and is supposed to sell its product cheaper than it sells via its network in Georgia?”, Khaduri asks.
Mtvralashvili disagrees with him.
“How can  we speak of monopolization of Georgian oil market when there are about seven companies operating there. You cannot name any other market where operate much more oil importers  than that. As to ousting petty business off Georgian market it is an international trend today, all big businesses swallow petty ones globe over and we cannot blame oil companies to this trend. Besides, petty companies disappeared because many of them were registered in off-shore and nobody could control where they were paying taxes and a lot of money was lost to the state budgets of both Georgia and Azerbaijan. And SOCAR established its own company in Georgia instead.”
Khaduri stresses that demand is decisive for price-making policy whatsoever.
‘SOCARI price is as high  as that other companies because the product is sold, demand defines the price, business is not a charity organization,’ He said.

Print
Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
18.09.2018
19.09.2018
USD
1
USD
2.6156
2.6188
EUR
1
EUR
3.0498
3.0593
GBP
1
GBP
3.4259
3.4414
RUB
100
RUB
3.8379
3.8673
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6188
EUR
1
EUR
3.0593
GBP
1
GBP
3.4414
RUB
100
RUB
3.8673
September 2018
Mon Tue Wed Thu Fri Sat Sun
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30