12kg gas cylinder price shoots up 263% in four years

In four years, the price of bottled liquid petroleum changed 17 times and almost always registered a price increase. In fact, the increase between March 2008 and October 2012 was of 263%.

Between 2008 and 2012, there were only three instances when the price of gas went down: during August 2010, between October 2011 and January 2012, and between June and September 2012.

Consumers remember better days when the price of the 10kg and 12kg gas cylinders cost €4.73 and €5.40 respectively in 2008.

Today, 10kg cyclinders are sold by Liquigas Malta at €16.30 while 12kg cylinders are sold at €19.60.

Information tabled in parliament this week by Resources Minister George Pullicino shows how gas prices rose steadily after March 2009. The first steepest increase was registered in August 2009 when it reached €10.50 for 12kg cylinders €9 for 10kg cylinders.

At the time, the Ministry for Infrastructure had attributed the rise to government’s decision to remove the last tranche of subsidies.

The move was in preparation for the liberalisation of the internal market that would later see the introduction of Easygas as Liquigas’s competitor.

Liquigas took over the distribution of LPG from Enemalta – whose gas division still stores and bottles liquefied petroleum gas in cylinders and bulk service on behalf of Liquigas – in February 2009.

At the time, government had also stated that subsidies to LPG products had cost it €600,000 in four months.

After August’s 2009 price increase – where in the case of the 12kg cylinders the price lasted 11 months – the price rose and fell until it reached €15.60 in December 2010.

In January 2011, the price of the 12kg cylinders rose to €16, reaching €17 in September 2011. Between October and January 2012, the price decreased by 50c but rose by a hefty €1.50 in February 2012 to reach €18.

In April 2012, the 12kg cylinder price went up again to €19.70.

Prices relaxed again between June and September but went up again at the beginning of this month, reaching €19.60.

In the case of the 10kg cylinder, prices increased an average of 61% every year. The highest price was registered between April and June of this year at €16.50.

As reported earlier this year by this newspaper, Malta’s regulator sets the domestic price for gas cylinders at according to the cost of purchases by the dominant supplier in the market.

Anthony Rizzo, the Chief Executive Officer of the Malta Resources Authority, said that domestic gas cylinder prices are based on the actual cost of LPG as purchased by Liquigas, the dominant supplier.

And that means that even when the other supplier – Easygas – purchases gas at a cheaper price, the MRA’s price ceiling is set at the ceiling determined by Liquigas’s cost of purchases.

According to the maximum price mechanism set by the MRA, the retail price of LPG and propane per kg “will be equal to the sum of the cost of LPG and propane, bottling charge and storage charges, distributors’ commission, depreciation and cylinder retesting costs, operating expenses, allowable mark up [on the selling price] and the VAT rate divided by the projected annual demand for LPG and propane (kgs)”.

The price review published by the MRA in 2010 stated that one of the principles behind the mechanism was to see that “the proposed prices should enable Liquigas to achieve a rate of return on capital employed that allow for a sustained and acceptable fixed asset replacement and upgrade policy”.

Meanwhile, audit company KPMG was commissioned – through a direct order – by the MRA to verify the costs behind the pricing mechanism. For €6,000, KPMG was also asked to suggest any improvement which should made to the pricing mechanism.

Minister Pullicino said the study was completed in March 2012 and the sum excluded VAT.