The Competition Council (the CC), taking into account the rapid and simultaneous rise in fuel prices in Latvia, which has a significant impact on consumers, explains that fuel prices for consumers are mostly affected by significant changes in crude oil prices and fuel wholesale prices, as well as the US dollars' exchange rate and other factors. At the same time, the fuel market is very transparent, and traders can easily keep up with competitors' prices and implement them to avoid losing customers. Therefore, neither similar prices nor their simultaneous changes in the market can in themselves constitute evidence of a cartel. The CC also urges fuel retailers not to take advantage or situation by unreasonably increasing prices. The CC plans to start market surveillance in order to find out how retail fuel prices are currently developing in Latvia and what is affecting them.
One of the factors influencing fuel prices for Latvian consumers is the prices in the world crude oil markets and the wholesale price of the products themselves - diesel fuel and gasoline. Since the Russian invasion of Ukraine, the price of the oil exchange has jumped significantly, from $ 95.53 per barrel on 25 February to $ 123.70 per barrel on 8 March[1]. Price is determined by the changing market conditions, i.e., the interaction between supply and demand. Latvian fuel traders purchase fuel in foreign markets, where prices are determined based on world market prices and the US dollar exchange rate, therefore, retail prices change regularly in accordance with changes in the world market. Retail and wholesale fuel prices will continue to fluctuate depending on the price of oil and the prices of oil products in Europe and the world, as well as exchange rate fluctuations and other factors. If prices in the world increase, then the prices of oil products in retail trade increase not only in the Latvian fuel market, but also in neighbouring countries and around the world. For example, on 10 March, the average price of a litre of diesel in Latvia was € 1,728[2], in Lithuania it was € 1,761[3] and in Estonia € 1.836[4].
In addition, the price to consumers is also affected by market transparency. Fuel prices are quoted at petrol stations and are freely available to all and published on the Internet.
Given that prices are transparent and the tradable product - fuel (the relevant brand of petrol, diesel) is a homogeneous product that is the same for all retailers, as well as the principles of actions of retailers, are similar, the cost structure is similar. Thus, Latvian fuel retailers are characterized by mutual observation and parallel operations or so-called intelligent adaptation. Both economic theory and the practice of the Court of Justice of the European Union show that following competitors' prices cannot in itself be evidence that companies have agreed on a price. In order to conclude that there was a cartel, it is necessary to establish a concerted practice between the companies. Therefore, parallel actions such as price changes at all gas filling stations do not in themselves constitute a violation of the Competition Law, as they can be implemented without any agreement on the restriction of competition.
Juris Gaiķis, the Chairman of the Competition Council: “Given the specifics of the market and its transparency, there is a risk that fuel retailers may take unfair advantage of rapid market changes. For example, when the purchase price of fuel increases, a retailer may increase the price for objective reasons. In contrast, another retailer may automatically follow the conduct of a competitor and adjust prices without economic justification, without taking into account the fuel previously purchased at the wholesale level. The CC, aware of the high level of uncertainty and commercial risks in the fuel markets, urges fuel retailers not to abuse this situation by artificially raising retail prices. At the same time, we would like to inform you that the CC plans to launch market surveillance to study how retail fuel prices are evolving and what is currently affecting them.”
[1] Crude oil prices per barrel in dollars on 25 February and 8 March: https://tradingeconomics.com/commodity/brent-crude-oil
[2] The average price of a liter of diesel fuel in Latvia on 10 March: https://lv.fuelo.net/prices/date/2022-03-10?lang=en
[3] The average price of a liter of diesel fuel in Lithuania on March 10: https://lt.fuelo.net/prices/date/2022-03-10?lang=en
[4] The average price of a liter of diesel fuel in Estonia on March 10: https://ee.fuelo.net/prices/date/2022-03-10?lang=en