On Wednesday evening till around 8.00pm the Malta Resources Authority (MRA) was still waiting for the go ahead to upload the new prices for gas cylinders. MRA had worked out the new gas prices according to a pricing mechanism that it has been using regularly for some time now.
With the price of gas reaching 1187 dollars per ton (Platt’s) the new prices were worked out and the new price of a 12kg cylinder of €18 would have increased to over €21 and that of the 25kg cylinder would rise from €30 to over €40. But MRA was not ready to increase the prices by that much and had recommended that the gas prices would be lower.
Then an order came from government: leave the prices as they are. With the local council elections just round the corner government did not want a new wave of gas price rises that would certainly had brought an angry response from the families and businesses that are already badly hit by the water and electricity bills.
MRA had to keep gas prices as they are even though the pricing mechanism which it uses to establish prices month by month showed that the price of gas cylinders had to rise.
The pricing mechanism uses this formula to work out the full cost:
Cost of raw material: 66.8% 69.9%
Bottling and storing charges: 14.3% 15%
Depreciation 2.9% 3%
Distributors’ commissions 3.4% 3.5%
Operating expenses 3.4% 3.5%
Allowable mark-up 3.2% 3.4%
On Friday afternoon MRA issued a press release saying that it had decided to suspend this pricing mechanism “until verifications of the costs are completed by an independent audit firm. The exercise is expected to be completed over the next few weeks.”
MRA has not said whether a new pricing mechanism is to be put in place and whether the prices in April will reflect this mechanism. With prices fixed as they were in February, gas suppliers are selling gas cylinders at a loss in March. It remains to be seen whether the loss they are incurring now will be recovered in the prices the MRA sets in April and the following months. If the international market price of gas falls, the gas suppliers might be able to recover their losses if the new local prices do not reflect the new international price. But if the international price remains high, there will be lot of pressure on MRA to increase the gas prices that it postponed at the beginning of March, 10 days away from the local council elections.