Fuel price cap being considered ‘for first time’, as regulator probes pump pricing

Portugal’s government has signalled for the first time that it could impose temporary caps on fuel retail margins if an investigation finds serious distortions in the market.

Environment and Energy Minister Maria da Graça Carvalho has instructed the energy regulator, ERSE, to carry out a detailed review of how fuel prices are set, giving it 20 working days to report its findings, according to Jornal de Notícias.

The move follows concerns that fuel prices at Portuguese filling stations rise quickly when global oil prices increase but take much longer to fall when international markets ease – a phenomenon commonly known as the “rockets and feathers” effect.

In a letter to ERSE president Pedro Verdelho, the minister notes that international oil and refined fuel prices, particularly diesel, have fallen in recent months, alongside repeated reductions in ERSE’s “Efficient Price” benchmark, which estimates a fair retail price for consumers. Despite this, average pump prices have remained above that reference level.

The regulator has been asked to analyse at least two years of data, comparing international oil prices, the Efficient Price benchmark and retail fuel prices to determine whether price increases and decreases are passed on to consumers at the same speed.

If ERSE uncovers evidence of anti-competitive behaviour or market failures, it must refer the matter to Portugal’s Competition Authority. Should it identify what the government describes as “serious distortions”, it has also been asked to consider proposing temporary maximum commercial margins on components of the final fuel price.

Beyond the investigation, the government wants to improve transparency in the fuel market by working with ERSE, the Directorate-General for Energy and Geology (DGEG) and the National Energy Sector Entity to provide consumers with clearer information on how pump prices are calculated.

The minister has also requested a detailed public breakdown of the components that make up fuel prices, including international oil costs, transport, biofuel incorporation, logistics, strategic reserves, retail margins and taxation.

The government says the aim is to strengthen consumer confidence, improve price transparency and determine whether fuel prices are driven solely by international markets or whether exceptional state intervention may be justified.

Source: Executive Digest

Natasha Donn

Journalist for the Portugal Resident.