"Unusually high" profits for oil companies

A proposal for oil support for cash-strapped households is currently on its way to Parliament.

Meanwhile, the country’s two oil companies, Effo and Magn, enjoyed a total of DKK 343 million in profits after tax over the past five years.

“Faroese oil companies have significantly higher profit margins than their overseas counterparts,” says Terje Sigurðsson, of Kappingareftirlitið, the Faroese Competition Authority.

”Both companies have enjoyed increasing profits in recent years.”

 >> SEE ALSO Faroese fuel prices well above global benchmark

In a 2016 report on fuel sales in the Faroes, Kappingareftirlitið concluded that the duopoly structure of the Faroese fuel market creates an anticompetitive environment in which it is relatively easy for the two big players to increase their profit margins.

Kappingareftirlitið has since 2016 been monitoring fuel retail prices listed on Effo’s and Magn’s websites and comparing them with the Brent price benchmark for purchases of oil worldwide.

These statistics are available here (text in Faroese only).

New legislation needed

Kappingareftirlitið has no legal authority to intervene in the oil companies’ profit policies.

“The only way this can change is if our politicians regulate competition into the fuel market,” says Sigurðsson.

Today’s price of 1,000 litres of home heating oil is about DKK 11,550, of which the government receives almost DKK 3,000 through VAT and oil taxes, while the oil companies take in the remaining DKK 8,600.

The Brent price of these 1,000 litres of home heating oil is about DKK 4,700, i.e. a profit of DKK 3,900.

Read the Faroese version of this article here.

More Faroese News in English.