The average price of diesel in Cyprus reached a new historic high of €1.997 per litre on Friday, prompting calls for the Government to consider reducing VAT on fuel and returning additional tax revenue generated by higher prices to consumers.
According to the Retail Fuel Price Observatory of the Consumer Protection Service, diesel is currently selling at between €1.879 and €2.098 per litre.
The average of €1.997 has surpassed the previous record of €1.989, registered on 12 July 2022, Cyprus Consumers Association President Marios Drousiotis told CNA.
He said more than 100 petrol stations across Cyprus are already selling diesel for more than €2 per litre.
Heating oil also reaches record high
The average price of heating oil has also reached a record high in recent weeks.
Prices currently range from €1.489 to €1.735 per litre, with the average standing at €1.608.
That is considerably higher than the previous historic high of €1.515 recorded in July 2022.
The average price of unleaded 95 currently stands at €1.718 per litre, ranging from €1.613 at the cheapest stations to €1.798.
Petrol therefore remains below its historic high of €1.828, recorded in July 2022.
Average diesel price expected to cross €2
Drousiotis estimated that the “psychological threshold” of €2 per litre for the average diesel price would be surpassed by Saturday.
He said increases are occurring daily. When a fuel company announces a price rise, however, it is not implemented by all petrol stations on the same day.
As a result, an announced increase can take two to three days to be fully reflected across the market.
For his part, Pancyprian Association of Liquid Fuel Station Owners President Savvas Prokopiou estimated that stations which have not yet increased their prices may do so on Monday rather than during the weekend.
Calls for VAT reduction
Both Drousiotis and Prokopiou called on the Government to reduce VAT on fuel as a way of easing pressure on consumers.
Drousiotis said higher fuel prices mean the state is collecting additional VAT revenue amounting to:
- 7.5 cents per litre from petrol
- 11 cents per litre from diesel
- 12.34 cents per litre from heating oil
“The additional state revenue resulting from the increases should be returned to consumers,” Drousiotis said.
Heating oil subsidy ‘the only way forward’
Drousiotis referred particularly to the forthcoming heating oil subsidy, describing it as “the only way forward” given the scale of recent increases.
He said the price of heating oil has risen by 65 cents per litre since March.
He stressed, however, that safeguards must be introduced to ensure that any subsidy actually reaches consumers rather than being absorbed by petrol stations.
Drousiotis said the Government could also reduce VAT on fuel from 19% to 5%, as it previously did with electricity, without requiring approval from the European Commission.
He added that Cyprus could seek EU approval for a further reduction in fuel excise duty, pointing to measures taken by Spain and Sweden.
“There are alternatives,” he said.
Petrol station owners also back VAT cut
Prokopiou said that, as fuel price increases have developed into a pan-European phenomenon, the time may have come for VAT on fuel to be reduced across the EU.
He argued that governments benefit from the additional tax revenue generated as fuel prices rise and suggested that the process of seeking change could begin in Cyprus.
If a VAT reduction is not possible, he said, consideration should be given to returning the additional VAT revenue collected by the state to consumers.
Cyprus has ‘no realistic alternative’ to cars
Prokopiou also highlighted Cyprus’ heavy dependence on private vehicles, saying the country has “no realistic alternative means of transport”.
He said this is reflected in the fact that fuel consumption volumes do not decline in proportion to price increases, as happens in other countries.
“We could request an exemption as a country,” Prokopiou said.
He noted that in other EU member states 90% of the population can be served by public transport, unlike in Cyprus.
Higher costs could feed into other prices
Asked whether a broader increase in consumer prices had already been observed as a result of rising fuel costs, Drousiotis said it had not.
He warned, however, that the fuel price increases recorded in September are expected to feed into the prices of other products within around one and a half to two months.
Source: CNA
