A state-owned gas station is a mockery of taxpayers

Last week, the government announced its intention to create a state-owned gas station that would sell fuel at low prices. The brilliant idea immediately made the rounds in all the media, with comments on the subject being a mixture of mockery and sincere bewilderment. And rightly so. It is difficult to understand who would think this was a good idea. Attempts by the state to engage in commercial activity always and everywhere end in failure. But beyond the economic nonsense, the idea of a state-owned gas station betrays the complete inability of the government and state institutions to fulfill their regulatory responsibility and solve the problems of the fuel market in Bulgaria.

Why a state-owned gas station?

Why does the government think it needs a state-owned gas station? Managing state reserves is a completely separate issue from running a business, so that cannot be a consideration. The only reason the government would want to set up a state-owned gas station to sell at low prices is because it wants to subsidize the sector. If it wants to subsidize the sector, it is an admission that something is not working properly. If something is not working properly, it is precisely its fault, because fuel imports and trade are highly regulated activities by the state.

The problem has been clear for years, in our country the markup on fuels sold at retail is quite high. The prices themselves are actually relatively low in absolute value compared to the rest of Europe, however the markup between the wholesale and retail price in our country is one of the largest. More data on what the markups are in Bulgaria compared to other countries in Europe can be found in this article.

What is the reason for this? It is due to the fact that Lukoil has an extremely dominant position in the fuel market, specifically in relation to excise warehouses. Directly or indirectly, Lukoil controls over 80% of excise warehouses in Bulgaria. Since every fuel importer needs to store their fuel in excise warehouses in order for their business to be financially profitable, all fuel companies must use an excise warehouse. This, of course, is not free. And if someone has a dominant position in terms of control over excise warehouses, they can increase the costs of their competitors, which will lead to higher fuel surcharges in the country.

The idea is extremely unfair to taxpayers.

The creation of a state-owned chain of gas stations in no way addresses this problem. It simply circumvents it. Instead of finding a way to solve the problem of controlling excise warehouses, the state will subsidize a chain of gas stations that will sell at low prices and thus, perhaps, force private traders to lower their markups. Even if this were achieved, what would be the point? The taxpayer would gain absolutely nothing, because the eventual reduction in markups would be achieved after he paid for the state-owned gas station through taxes.

This actually creates an extremely perverse paradox. The victims of the lack of competition in the country's fuel market - taxpayers - are the ones who will now have to pay for this problem. Moreover - not every taxpayer consumes fuel. Because not everyone has a motor vehicle. But every taxpayer will pay for the state-owned gas station. This makes the whole scheme even more unfair. A person like me, who does not own a car, will have to pay for cheaper fuel for car owners, which is necessary because the state is unable to solve the problem of Lukoil's dominant position in excise warehouses.

The biggest scandal here is not even the idea of a "state" gas station, no matter how absurd it is in itself from an economic point of view. The biggest scandal is the state's complete abdication of regulatory responsibility, which it has appropriated for itself. Politicians constantly explain to us how certain sectors, such as fuels, need strict state regulation, while completely failing to implement it. Public institutions cannot have both full power and no responsibility, and in the end, the taxpayers pay the bill. This is simply unacceptable.

The state-owned gas station is an abdication of regulatory responsibility

Not to mention all the other problems with the creation of a state-owned gas station. For example, the serious risk of abuse of public resources, which is always present when the state is allowed to develop commercial activities. Let's not forget that the state-owned Bulgarian Development Bank, which, although supposedly supposed to support small and medium-sized businesses, has in recent years become notorious for granting loans to a number of quite large and increasingly politically connected businessmen. Moreover, this "bank" is subordinate to the same ministry that is now proposed to control the state-owned gas station - the Ministry of Economy.

Ultimately, the idea of a state-owned gas station is a mockery of taxpayers and the regulatory responsibilities that have been voted on the government and the state. And an extremely puzzling idea in a period of crisis, in which the budget will be in deficit anyway, taxes are being cut to support certain sectors, direct state aid is being granted to employers and workers... Burdening the budget with an additional expense, which is completely unnecessary if the regulatory function were being performed, is absolutely unnecessary and even risky from a fiscal point of view.

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