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CABINET CAUTIOUS WITH PACKAGE TO EASE IMPACT OF RISING FUEL PRICES

Ministry: Liberalize oil market

RISING fuel prices have kept the country's oil refinery in the spotlight.
After the Finance Ministry announced its intentions to impose a hefty fine against Slovnaft for what it called a violation of pricing discipline, the Labour Ministry has come up with a proposal that could bring crucial changes to the company's operation.

RISING fuel prices have kept the country's oil refinery in the spotlight.

After the Finance Ministry announced its intentions to impose a hefty fine against Slovnaft for what it called a violation of pricing discipline, the Labour Ministry has come up with a proposal that could bring crucial changes to the company's operation.

Labour Minister Ľudovít Kaník is proposing to separate Slovnaft's fuel production from its distribution network. The minister says his immediate goal is to ease the impact of rising fuel prices on the country's citizens.

If approved, Kaník's proposal could force Slovnaft to unbundle its fuel production from its retail networks. Kaník also proposed that separate oil reservoirs be built, ones that are independent from Slovnaft's reservoirs, to increase the competition on the market.

"The goal of Minister Kaník's initiatives is to ease the impact of increasing fuel and natural gas prices on Slovaks," Labour Ministry spokesman Martin Danko told The Slovak Spectator.

Danko explained that the ministry's draft legislation package includes state bonuses for housing expenses and bonuses for the use of cars for the physically disabled.

The Slovak cabinet started a discussion on Kaník's package on September 21 but have delegated the issue to the economic ministers.

"These are serious things. We want to take all the steps required in line with market conditions to help prevent the unchecked increase of energy prices," Finance Minister Ivan Mikloš said.

If the antitrust authority found Slovnaft abusing its position on the market, it could force the oil refinery to sell its petrol stations once these were separated from its oil production business, analysts suggest.

Slovnaft spokeswoman Kristína Félová told The Slovak Spectator that she could not comment on the minister's initiative since the oil refinery had not yet seen it.

However, Félová added that Slovnaft did not quite understand the reasons for the Labour Minister's move. Based on the European Commission's statistics, net fuel prices in Slovakia are among the lowest.

"Even Ivan Mikloš confirmed this when, on September 14, 2005, he told the daily SME that 'another known myth is that we have the highest gasoline and diesel prices. It is not so. In case of the diesel, we are at the level of 25 countries of the EU and in case of gasoline, we have the sixth lowest prices in the EU, lower than all our neighbouring countries'," Félová quoted the minister.

State officials have said little about Kaník's proposal.

Slovakia has tried to comply with EU liberalization laws and unbundle its gas utility SPP. However, on June 21, Slovak cabinet ministers failed to agree on a plan that would essentially liberalize the Slovak natural gas market.

The EU legislation, which requires natural gas companies to unbundle their import, transit and distribution branches, aims to dismantle state-owned monopolies and thus allow customers to choose their own supplier.

The first unbundling model proposed by then-Economy Minister Pavol Rusko assumed the creation of three new natural gas companies under the auspices of SPP Holding. All of SPP's intangible assets would be transferred to SPP Assets, while the remaining two companies would handle the management of transportation and distribution.

Slovnaft gained its petrol station network in 1995 within a privatization project approved by the government of Vladimír Mečiar.

According to financial daily Hospodárske noviny, the then state-owned Slovnaft gained 353 petrol stations. The Antitrust Office approved the merger with the condition that the number of petrol stations by 2002 would not exceed half of the total of the petrol stations on the Slovak market.

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