Fuel prices running amock!

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It is hardly usual that June has only begun and petrol prices already changed 18 times. Naturally it more often means increase of prices, often considerable rises. Hardly had time to adjust to relative prosperity- namely forgetting about daily rises because of previously 20-30% inflation- fuel prices each day remind us about those times.

Fuel prices are getting really expensive! Dissatisfaction arises at the whole society, not especially among low income people. Declarations of famous and financially appreciated people reflect dissatisfaction, regardless that the price increase would not effect their consumption customs. Their conclusion: society’s patience is nearing its end, Generally most people find the price of fuel not payable, considering the present income conditions. That is why they have to think thoroughly over their consumption customs. For these people this situation causes an unnatural feeling, as instead of their increasing possibilities they have to despair of their habits and way of life. High income people first of all blame the proportion of price and value. On their opinion fuel doesn’t worth its price so they feel themselves swindled and used. These people are successful in all territory of life so they can not assimilate to this feeling. Usually they decide whether a product or a service worth it price and whether they are willing to pay it or not. They realised that this situation is incorrect, that they become compulsion buyers where they do net get real service. These effects each day are getting stronger due to exceptionally bad social communication.

That was also recognised by economic experts. The national oil company has tangible responsibility which was published by the media many times. It is certain that this oil company was late to recognise their duty to inform, as they are in connection with more millions of consumers. They should have known, realising the happenings of the manipulated internationals fuel market, that the usual communicational generalisations- like changing of world market price of petroleum and considerable weakening of the HUF compared to the USD- wouldn’t be enough in this case. However we could notice some changes in the last few weeks. Although they still don’t realise that main aim should be the communication of clear information to all people and not answering to political announcements. When I was a student my father told me: those people who can not formulate their deepened scientific conceptions in only a few short sentences understandable by the simple people, then they do not understand their own ideas. I really made note of this idea and it often occurs to me when I lecture at universities and in lot of forums when I noticed the lack of comprehension in the audience’s eyes.

I think MOL is in debt for some answers so far. This company working with 10 days storage so it is quite strange that during 5 months- by the expert management- how can they show the store with different average prime cost 18 times. Company has to announce something about proportion of domestic petroleum exploitation, about it’s cost, about the quantity of fuel, about proportion within all turnover, about price effects, etc..

In spite of many communicational faults I am more disturbed by the political and public candidacy. It disturbed me as a politician an economist and as a businessman. Political announcements sometimes contained open threats. It was obvious that most of the people making declarations, despite their high social positions had no comprehension of the basic principles of the democratic institutional system. I find it completely acceptable that in such a case the Competition Office makes full investigation. However it is unacceptable to make this investigation not by the binding of law but under political pressure. It sometimes misses the basis of law so it might be difficult to interpret. It is also unacceptable that leading politicians turn to the Main Prosecutor. It is surprising that important political persons lack basic legal knowledge and they do not recognise the character of their speeches (threatening, corruption). Most of them are not wicked but their professional knowledge which is essential to their position is missing to an extent which drives them to trying to save their careers in these situations, their own political responsibility with methods which are contrary to the law.

It also difficult to write forbearing professional criticism about the imaginations ‘to calm the public opinion’. MOL is an internationals company with more 10000 shareholders and this company was quoted in the Stock Exchange. Their concept about the functioning of economic companies refer to wrong knowledge as in the opinion that state as a share holder can effect the company’s price policy. Namely if the company raises prices against the law, the state may forbid this action. However in case the company maximises their revenues with this price raises -as the owner – the state could not make a decision which cause revenue losses legally, if the determination of prices has referred to the member of directory of the state. In case of conscious revenue loss to the company the named member caused intentional loss to the company and to the other owners, so he bears material and criminal responsibility and he is responsible with all his private wealth . In that case the other owners of MOL can initiate the exclusion of the state member.

It would be an edifying procedure in the field of our law development if somebody from the MOL ’s shareholders call upon the Hungarian state to pay compensation to the owner partners. It would easily be proved that state caused the fall of share’s value as he was the illegal speaker. Discussion of the financial minister with the leaders of MOL has caused sensible losses of exchange. Financial minister’s notion was: form prices in that way as the state’s representative can modify it. The same losses of exchange were caused by these suppositions: introduce price of the authorities, introduce retardationally the rising prime costs, and introduce untimely conditions which may decrease the costs, and get property to reach significant receipt.

What can we do if MOL ’s decisions are doubtful, but we know there Is something wrong in connection with the fuel? I think we will find the solution after the elimination of political elements. If I remember the so-called taxi demonstration – this was not a simple case. Government parties got angry with me when I examined the facts and published them. These data show: the reason for the rising oil prices is only 50% because the change of oil prices the other 50% is the budget’s tax revenue rising which was drew by the rising prices. We use the facts and that way we find the solution. To what degree to obtain fuel was more expensive in was payable by those people who used it. Budget had to be satisfy by the planned tax revenues.

Today also this solution would be right! With objective analysis of this situation we could find the acceptable proposals and reserves. Fiscal tax is fixed today so it is not the tax category where we may find the tax revenue’s surplus. VAT, customs and dues have percentile degrees for the getting into cost. In this field the level of deprival is above the plan. In some cases it is accumulated as after the higher getting price the payable customs and dues VAT make further increasing to customs and dues. We can clear up the planned decrease of consumption the higher tax revenue’s surplus which belong to unit fuel whether decrease the all tax revenue’s mass if it happens in what quantity. However this is only mathematics where all data is known. If we look at the reality the numbers could be presented. As follows we could see that whether the real reserves are included in the tax revenue’s surplus. In that case we have to avoid all approaches which are tendentiously misleading. Hear the financial minister’s next announcement was very bad: VAT revenue now is more in the case of fuel but people’s buying power is a fixed sum, so if they buy more fuel, they can not spend money on other product groups so there will be the VAT shortage at the same volume.

Also MOL should participate at the same investigation! MOL’s price forming could sign reserve, if regulation of the price gap has percentile form partly or completely, where the surplus causes profit if he had bought it more expensive because in that case the projection base is higher.

Important to mention: both MOL and state realise their more revenue absolutely legally, the losers are the residents. That is why state will not “obliged” to deregulation of tax deprival. If the state resident’s losses makes stronger because of the fuel price rises and the changes of exchange rate, in addition to rising their own sources –make appears policy badly. At the same way MOL can be forced not obtaining profit surplus of the difficult situation of fuel’s users only by the public. This is the plan work not like the state threatening and instead of this is illegal.

Finally solve this problem the comparative analysis is unavoidable, which has to contain the combination of fuel price at internationals respect and this will discover frames of necessary legal changes. In that way we can clear up the real price gaps and also the gap of competitors. If the price margin is lower than competitor’s not worth wait for the decrease to the debit of price gap’s revenues because in that way the company’s sources will be deprived and he will be incompetitive. If the price margin is higher so that is a possible way. We may also examine obtaining of the company: we get to know whether company buy too expensive raw materials or the contrary: they have excellent obtaining policy. In the latter case we can allow him this surplus helping his better than average development. Also worth looking through the proportion and degree of state deprival. If the state used the under averaged deprival, so we can sure that not the tax decrease the necessary step. In the contrary case Is not only illegal, but also immoral to blame others and use the “strength policy”!

The way is long, but we could pass it …………..!



08.06.2000. Budapest … János Palotás

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