Fuel with a code name – “death”

2012.07.30 ავტორი:

Fuel not produced up to European standards is being sold in Georgia at a European price. At present,the quality of fuel is defined in a resolution created by the Georgian government.

As TSpress.ge has investigated, lead was found in fuel claiming to meet European quality specifications. This matter has been carefully concealed by the importers because European specifications demand that fuels not contain lead.


Resolution 259 of the Georgian government from December 30,2009,states :One of the main aims in Georgia is to fulfil the demands of environment Protection.


In this country, the reinforcement of standardized European specifications refers to the regulation of matters connected to the quality of fuel and the protection of the atmosphere from vehicle exhaust fumes.”


However, the fuel imported by the government doesn’t meet the standardized European specifications because of the presence of lead in its composition. Fuel containing lead, as it is permitted in Georgia, was abandoned in Europe a long time ago.


The government doesn’t  hurry to make new standardizations and, as a result, the standardized fuel quality specifications haven’t recently improved.


Since the State doesn’t appear to concern themselves with the safety and health of its own citizens and sets high taxes on the fuel business, it is natural for the price to be constantly high and the quality to be irrelevant. Also, the oil importers do not have any incentives to bring fuel with higher standards and better quality into the Georgian market.


The quality of the fuel in the provider countries

In Europe, the standard fuel “Euro 2” was abandoned in 1999, when “Euro 3” replaced it. “Euro 4” was posed in 2005, and it has been followed by “Euro 5” since 2009.


Fuel which contains lead has been completely abandoned in the European Union since 2000,since the existing lead in vehicle exhaust fumes endangers human health and pollutes the environment.


Azerbaijan,a neighboring country of Georgia currently uses the “Euro 2” standard, but the country  is going to replace it with “Euro 3” starting on July 1,2012. This means that a large quantity of the fuel of this (Euro 2) standard is sold in Georgia.


In Georgia, some of the current oil importers say that they sell the standardized European fuel “Euro 5” brought from Europe. However, this isn’t true: no type of fuel imported into Georgia reaches European specifications and this right to import inferior fuel products has been officially given to the importers by the government.


It is possible that the reason for this is that last year, the government budget received around half a billion GELs in income from the fuel sector (this amount being a surplus price and profit equal to taxes paid for the budget)


According to official information, if the fuel quality is tightened by the government, it will make the price increase, therefore reducing budget revenues.


Maybe for this reason, the government permits importers to bring bad quality fuel for lower prices and sell it at a price equal to European specifications.


The fuel quality in Georgia

Why “Socar”,”Regular”,”Wisol” and “Euroregular” have similar characteristics.

The aforementioned firms which provide the country with fuel have almost equal amounts of lead contained in their products. Also, it seems that consumers buy the same quality products at various prices.

The official websites of “Wisol”,”Lukoil Georgia” and “Rompetrol” state that their products are European quality fuel for an affordable price and are imported from European Union countries ( Italy, Balgaria, Romania).


As for “Lukoil Georgia”, their chemical laboratory manager couldn’t deny the existence of the lead in the fuel.


TSpress decided to go to a laboratory in order to investigate the exact quantity of lead in “Visol”, “Rompetrol”, “Lukoil Georgia”  and “Euroregular” products itself.


According to the oil product laboratory results, the amount of lead in “Wisol”, “Euroregular” – was – 0.00075 units, in “Lukoil – 0.00041 units, and in “Rompetrol – 0.00037 units.


Where does the lead come from in fuel imported from Europe?

Professor Mzia Andguladze of the Technical University explains that there is originally no lead in the fuel fraction; - it appears there only after having processed gasoline is important since it allows for appropriate ignition timing and proper car functioning. That is why Tetraethyllead is added to the fuel. Not only does this substance maintain a high quantity of octane, but also it is very economical for companies producing fuel.


As opposed to Georgia, to increase the quality certification of “Sokar”  company in the beginning of may 2012. According to the results, the amount of lead in their “Regular” gasoline is 0.0008 – 0.0010 units, meaning that “Sokar” ‘s “Regular” – 0.0008 units, and in “Wisol” ‘s “Evroregular” – 0.00075 units) this intensifies the doubt that “Wisol” sells “Sokar” ‘s gasoline and that these two types differ from each other only in price.


“Romepetrol” explained the amount of lead in “Euroregular” – in this way: “There are no definite demands of quality in Georgia, so the imported petrol is produced, it isn’t refined properly as in other countries.


It is true that the amount, of lead is lowest in “Rompetrol” ‘ s “Evroregular” among all companies, but it still doesn’t satisfy demands. (Even though the oil importers bring fuel from Europe, it doesn’t meet European specifications). The fact that fuel imported into Georgia passes through Europe has nothing to do with its quality.


The Union of Oil Importers states that  “Regular” gasoline types are used by 80% of population in Georgia. This makes us realize ecological problems facing the country, especially in Tbilisi.


The prices of petrol in the counties of CIS (Commonwealth of Independent States) and the European Union

High-priced petrol of poor quality is common in former USSR countries. A litre of petrol costs $1,5 in Georgia. In terms of high prices, second place is taken by Moldova, third  - Ukraine with the cost of $1,26. In Armenia, price range – from 90 cents to $1.04 and in Azerbaijan – 48 cents.


Unlike Georgia, the gasoline prices in the European Union are higher, but the quality of petrol and social standards are higher there as well.


Among the European Union countries, the highest ratio of petrol’s price and quality is in the Netherlands (http://www.energy.eu/), where a litre costs 1.79 Euros. The cheapest petrol is in  Estonia – 1,285 Euros.

In Luxembourg, where oil products are imported similar to Georgia, a litre costs 1.374 Euros. 

Last year in Georgia, lead-containing gasoline cost 2.21 GELs(about 1 Euro). If we compare the standards of living in Georgia and Luxembourg, we will see the dramatic difference between them since the living standards in Luxemburg are significantly  higher , even though petrol prices are unfortunately identical.


The reasons for high prices

In general, international experts explain various prices for petrol in different countries by the varying customs rates and taxes.


According to a Georgian expert, Lado Papava, oil importers act as an oligopoly meaning the market which has control over the supply of a commodity is controlled by a small number of producers, each of whom is able to influence prices. Thus, each directly affects market position of its competitors. Such actions are quitecommon in the oil business.


There are 5 companies in the fuel market which create and maintain almost the same prices, Levan Izoria, a representative of Free Democrats, says. This is supposed to be against the law, according to article 195, and, if performed repeatedly, results in 2 to 4 years in jail for the perpetrators.


The commercial manager of “Sokar”,Varshan Mamedov explains that oil importers buy different types of gasoline at the same prices, equal to international prices, and they also pay high taxes to the government.


It remains unclear why “Sokars” gasoline “euro 2”, brought from Azerbaijan to Georgia  in one day has the same price as “euro 5”, brought from Europe.


It is thought that these growing prices are connected to corruption with the elite, although this is denied by the oil importing companies, who explain that the high prices are connected to the  free market principles of the country.


Revenue from fuel business

According to the  Georgian tax code, oil importer companies pay taxes from incomes, benefits, additional costs, customs and excises. Also, oil importers work  according to so called international fuel “platz”(=place) prices.


According to “Sakstati” data, in 2011 oil companies were still the largest import groups in Georgia with, 894 million dollars revenue, 13% of total imports.


Precisely 356 082  tons of oil were imported from Azerbaijan with a total cost of 341million USD. Also,”Sokar”, which maintains 40% of oil market, paid 198 million GELs for the tax last year.


In total, oil companies paid 495 million GELs in taxes for the budget last year.


The difference between the primary  and selling prices

Last year, 356082 tons of oil and oil products were brought into Georgia from Azerbaijan with a total cost of 341 million USD, i.e. a ton of oil cost about 958 dollars. Therefore a litre petrol should only cost 0.74 USD.   


The National Bank of Georgia puts average exchange rate of Lari to dollar 1,7 in 2011. So, the primary price of a litre gasoline should have been only 1.25 GELs


As  “Sakstati”  announced, the difference between primary prices and selling prices was only 0.83 GELs.


Petrol is much cheaper in Armenia than in Georgia. The chairman of the Oil Importers and Consumers Union states that importers have to pay only 12% for customs, and the price of excise is low in Armenia, unlike in Georgia.


Lado Papava is certain that it is possible to reduce fuel prices, but the Georgian government is not interested in this because these companies support the government’s budget considerably.


Free competition would lead to the reduction of fuel prices, and consequently, the  incomes of oil importers. This could also increase the use of fuel, meaning that the budget wouldn’t lose its incomes. The government doesn’t start to improve fuel quality and doesn’t take any to improve these circumstances, none of the oil importing companies will bring proper quality fuel up to European specifications.


So far the state is the beneficiary  receiving the most profit from oil importers. The only loser here is the consumer who pays high prices for bad quality fuel and, lives with exhaust fumes harming the population’s health.













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