Geopolitical tensions, restrictions on global oil supplies, rising transport costs and taxation are combining to drive the latest increases in fuel prices in Cyprus, according to energy expert Dr Constantinos Hadjistassou.
Speaking on Morning Briefing with Katerina Eliadi, the University of Nicosia professor said both international developments and domestic factors are contributing to the pressure facing consumers.
Red Sea tensions and tighter supply
Hadjistassou pointed to developments in the Red Sea, including disruption linked to the Houthis, as well as restrictions affecting Saudi Arabian oil exports.
Supply has also been affected by Ukrainian attacks on Russian energy infrastructure. He said a Russian refinery capable of processing around 230,000 barrels of crude oil had been hit, while Russia has restricted exports of oil and petroleum products.
Problems have also emerged in Libya, where developments at oil facilities and the closure of a pipeline connected to a major producing field have affected exports.
Oil becoming more expensive to transport
Higher transportation costs are adding further pressure.
Hadjistassou said both tanker freight rates and insurance premiums have increased, costs that are ultimately expected to be passed on to consumers.
Although Brent crude has declined from around $107 to $97 a barrel, he expressed caution over whether the fall can be sustained given the number of ongoing geopolitical crises and disruption to energy infrastructure.
Nearly 75 cents of a €2 litre goes on taxes
Taxation also plays a significant role in the final price paid by Cypriot consumers.
According to Hadjistassou, when diesel costs around €2 per litre, almost 75 cents represents excise duty, VAT and other charges.
He noted that VAT is also imposed on top of excise duty.
While higher taxation increases government revenue, Hadjistassou said it also adds pressure on consumers and businesses and contributes to the cost of living, inflation and energy poverty.
Why Cyprus is particularly vulnerable
Cyprus is more exposed to fluctuations in international fuel prices because electricity generation remains heavily dependent on oil and other conventional fuels, Hadjistassou said.
The situation is compounded by delays in bringing natural gas to Vasiliko and the limited capacity to store electricity generated by photovoltaic systems.
As a result, higher international fuel prices are not felt only at petrol stations. They also feed into electricity prices and the wider economy.
Hadjistassou warned that the pressure could continue for as long as the major international conflicts remain unresolved, noting that damage to energy infrastructure cannot always be repaired quickly and, in some cases, may take years.
