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Bulgaria to get new state fuel company to take on oil companies and force prices down

Bulgaria’s parliament on June 5 gave the green light to a government plan to set up a state-owned company that would store oil and would be allowed to build filling stations and fuel warehouses.

The idea was suggested in May as a way to force oil companies to lower their prices. The decision provoked many negative reactions by economists who claim it would not resolve the problem but only shows the state is unable to deal with it.

According to the government’s plan, approved by the parliament in its first reading, a state-run company will be set up. It will have to build 100 fuel retail stations throughout the country in order to influence oil prices.

The idea was originally proposed by the finance ministry, which suggested it would secure the maximum level of competitiveness on the market as it would operate fuel warehouses across the country where it would store fuel for other companies as well. 

The new company, State Oil Company, should also execute the functions of a state reserve for storage of oil products.

However, critics of the idea fear the state is intervening too much in the economy. Instead of investing BGM500mn in setting up an oil company, experts suggest that the state should put efforts into making the Commission for Protection of Competition (CPC) a strong and independent institution that would prevent collusion in the future.

The idea came after in April the CPC launched an investigation into suspected collusion among its members in setting fuel prices. Meanwhile, the government found out that fuel prices charged to buyers are higher than the prices at which the fuel is released from warehouses.

In May, CPC raided the offices of the Bulgarian Oil and Gas Association as part of its investigation aiming to find out how fuel prices are being set by several companies, including Lukoil Neftochim Burgas, Lukoil Bulgaria, Saksa, Insa Oil, Rompetrol, Shell Bulgaria, OMV Bulgaria, Petrol and several other companies.