Oil companies will sue the government, want compensation for incorrect price calculation

Oil companies have warned the government that they will sue it and seek damages for understating the price of oil.

As of March 26, the government reactivated the Hydrocarbons Transparency Board, which calculates prices based on the formula adopted during the 2022 crisis, when oil became more expensive after Russia's attacks on Ukraine.

Since its reactivation at the end of March this year until May 28, the Board has intervened in the market about 30 times, often for three consecutive days (see graph at the bottom).

From the beginning, operators complained that the calculation is made based on the FOB (Free on Board) price, which does not take into account transport and insurance, and not the CIF price, which includes transport and insurance and which increases the purchase price by 45-50 dollars per ton (since 2024, international trading companies no longer operate on the basis of FOB contracts, but on the basis of CIF contracts).

While the price set by the Board was based on the FOB indicator, customs calculated VAT on the CIF indicator. This difference, operators complain, has created a cost of 4.7 lek per liter, creating huge losses for importers.

In a letter addressed to the Ministry of Economy, the Ministry of Finance and Prime Minister Edi Rama, which Monitor has seen, the largest importing companies say that since requests for a review of the pricing methodology and gross margins have not been taken into account, they have presented their position, even considering sending the case to Court.

Importers complain that the Transparency Board, (established in 2022), in setting prices after its reactivation in March 2026 does not reflect the real operating costs of market entities, by not taking into account the increase in expenses caused by inflation and structural changes in costs during the period 2022–2026. Importers complain that the prices set by the Board have been and continue to be below the real cost level, causing continuous losses for companies.

In the letter, the importers have claimed that there are differences in the cost calculation and consequently financial losses for market entities, which are documented with accounting records and customs documentation. They say that the methodology based on the “Platts FOB” reference, adopted in 2022, does not reflect the current economic reality of operators, who already import under the “Platts CIF” delivery terms.

They claim that the adoption of a normative act with the force of law, which provides for the creation of a Board that not only determines the selling prices of oil, gas and their by-products, but also intervenes in the determination of essential elements of the contractual relationship, including the form of contracts (FOB), constitutes a direct and significant restriction of the freedom of economic activity.

Another element that has increased real costs and has not been taken into account in the Board's formula is inflation over the last four years, including increases in salaries, social security, rents and other operating expenses.

According to the Board's formula, operating expenses (gross margin) have been improperly calculated at the level of 3 lek/liter, while based on real accounting data, this indicator, according to importers, should be around 4 lek/liter. In the retail market, according to the Board's formula, another margin of 12 lek/liter is added, which according to importers is underestimated since expenses actually reach 15 lek per liter. This methodological deviation alone creates a difference of around 4 lek per liter, which constitutes a direct loss for the companies, importers claim.

As a result, operators complain that the Board has not calculated a cost of 8.7 lek/liter in the final price of fuel (4 lek from the margin and 4.7 lek from the VAT calculation), which has caused losses and has led many small operators to be on the verge of bankruptcy.

Importers warn that the continuation of this situation, without an immediate review of the regulatory framework and pricing methodology, will force entities to operate at a loss, seriously jeopardizing the continuity of their commercial activity.

The importers have warned that if measures are not taken within 10 days to stop further damage, they will go to the competent court to seek a judicial solution regarding full compensation for all consequences and damages caused as a result of the calculation of prices below cost. Sources indicate that so far, the estimated damage is approaching 7 million euros./ Monitor