Fleet News

Government faces huge debt to oil firms

FUEL has become a burning issue in Portugal now that the government owes the oil companies a credit of about €60 million.

The debt follows an agreement to limit the price of diesel. Lisbon believed that the increase in the price of fuel was temporary and announced that it would not affect consumers - general elections were on the way and no party wanted to introduce unpopular measures.

But almost a year has passed with no fall in the price of fuel, and when oil reached $30 per barrel the Ministry of Economy was in trouble. Its losses had been huge and even though petrol taxes had risen by 10%, this has not been sufficient to cover the losses of the oil companies each time they sell a litre of diesel. And in Portugal two litres of diesel are sold for every litre of petrol.

Rumours are that the price of both petrol and diesel will go up by 5 escudos (€0.025) per litre, which is likely to cause another major upset to the country's 2% inflation goal, and economists now predict inflation nearer 2.5%, well above European targets and failing the criteria for the single currency.

Another key factor for Portuguese drivers is a change in the car tax system - that will apparently be based on the price of a car from next year. Until now, taxes have been paid according to engine capacity, which has caused a massive distortion in a market where A and B segments account for half the total passenger car sales.

In addition, the minimum salary in Portugal is half to one third of what a similar fellow-eurocitizen earns, so it is not surprising to find that 90% of the Portuguese population drives a poorer car than they would if there had been tax harmonisation.

This new system will have a tremendous effect on car sales in this country since demand and supply will have to adapt to the new legislation. Maybe then we will have a chance to move from the Puntos, Fiestas and Corsas to the Mareas, Mondeos and Vectras our drivers deserve. If the tax system alters to list price next year, then the fleet market will also experience dramatic changes in the course of 2001. A year to watch.

  • Joaquim Oliveira is editor in chief of Motorpress, Portugal's leading automotive publisher. (April 2000)
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