Fuel cheaper by a few cents if the Government extends lower excise taxes

Fuel prices at gas stations could be lower by a few cents starting Tuesday, if the Government extends the Decision on a temporary reduction in excise duties, which is valid until midnight on Monday. The Government made the decision to reduce excise duties by 50 percent on Eurodiesel and by 25 percent on two types of gasoline on March 20th and set a deadline of April 21st.

"News" did not receive an official response from the ministries of finance and energy regarding whether the decision on reduced excise duties will be extended, but according to unofficial information, it is planned to be extended for four weeks.

The Ministry of Energy will announce new fuel prices on Monday that would be valid for the next seven days, so it must then have a decision from the Government on the excise duty amounts.

Yesterday afternoon, Iran opened the Strait of Hormuz, or rather, unblocked the flow of oil and petroleum products from the Persian Gulf, which within ten minutes of the announcement of the news caused the price of crude oil to drop from $95 to $88 per gallon. This also partially affected the oil derivatives market, where prices fell slightly.

Retail prices in Montenegro are adjusted for seven days with prices on the oil derivatives exchange, by calculating the average trading price of oil derivatives in the previous week on Mondays and comparing it with the average from the week before. Since the drop in prices on the oil derivatives exchange occurred on the last day of the calculation period, it will have a smaller impact on the average for the entire week, which is why a decrease of only a few cents is possible from Tuesday.

Iran said the strait, which has been under blockade since the start of hostilities in late February, would remain open to international shipping during a 10-day ceasefire, during which time a longer-term peace deal is expected to be reached between the warring parties.

If yesterday's prices are maintained on the stock exchanges during the next truce and there is no new bad news, a significant decrease could be expected from the next settlement, on April 27th.

In the past two months since the outbreak of the war, it has happened that the announcement of good news about a ceasefire or deblockade has briefly lowered crude oil prices by as much as ten percent, but they soon returned to their previous level or experienced a new increase due to the continuation of hostilities or the postponement of negotiations.

During the war in Iran and the Persian Gulf countries, a significant part of the refineries and other infrastructure was damaged or destroyed, which is why the decline in the prices of petroleum products, especially diesel and jet fuel, did not follow the decline in the prices of crude oil. This region produced about 30 percent of the world's needs for diesel, as well as about 40 percent of the world's needs for jet fuel and gas, which is why these energy sources experienced a more significant growth compared to gasoline.

Return of excise duty on diesel would mean an increase of 27 cents

The price of fuel in Montenegro, starting Tuesday, but also in the coming periods, will be most affected by the Government's decision on whether, when and to what extent to restore excise duties.

The excise duty on diesel is 44 cents per liter, or a 50 percent reduction has a direct impact of 22 cents. However, as the excise duty is included in the VAT calculation base of 21 percent, the total impact on the lower price of fuel was 27 cents per liter (22 + 17%). When there was also disruption in the petroleum products market and a large increase in prices in 2022 and 2023, the Government reduced excise duties at that time, and later gradually increased them to the full amount, which it can do now.

The excise tax on both types of gasoline is 54,9 cents per liter, so the 25 percent reduction (with the impact through VAT) resulted in a lower price of 16 and 17 cents (the difference is due to rounding to the nearest cent).