OREANDA-NEWS. October 20, 2014. The price of Brent crude dropped to 85.04 dollars per barrel on the London Stock Exchange, the lowest value in the last four years, due to the abundant supply, demand slowdown and the appreciation of the dollar.

The price of Brent crude, - the benchmark on international markets, fell by more than 20 per cent against June. The International Energy Agency estimates a further decline, taking into account that the Organisation of the Petroleum Exporting Countries (OPEC), as well as producing countries OPEC non-members increased their production.

Nonetheless, prices at the pump depends less on the quotations of one barrel of oil and more on the ones of fuel at an international level, specifically, at stock of petrol and diesel in Rotterdam, called Platts quotations. These quotations on oil products had a slightly increasing trend in the first half of the year until the end of June, when, after having reached a maximum price of over 1,020 dollars per tonne for the most demanded Premium petrol, they began to decrease slowly. In the last three months, prices have fallen from 973 dollars per ton on 9 August to 838 dollars on 13 October.

Platts quotations on Euro5 diesel followed the same trend, although the decline was much slower, from a value of 903 dollars per ton on 9 August to 790.5 dollars on 13 October.

Thus, Platts quotations on petrol dropped by 14 per cent, and by 12.5 per cent on diesel. And this happened in less than three months.

On the other hand, gas stations prices had a different development. After the increases by more than 5 per cent in the first half of 2014, in mid-September oil companies increased petrol prices by 0.30 lei per litre and diesel by 0.20 lei respectively.

Oil companies motivated increasing the price by the appreciation of the dollar, since the purchases are made in dollars and the sales in the national currency. The Moldovan leu indeed depreciated against the dollar, by 12.7 per cent since the early 2014, amid Russian rouble’s depreciation by 23.4 per cent and the devaluation by 56.9 per cent of the Ukrainian hryvnia. The fall of the currencies of two of the biggest trading partners of Moldova could not but put pressure on the Moldovan leu.

But its depreciation during the period when oil prices were rapidly decreasing was twice slower than the Platts quotations price decrease.

The increase in fuel prices is unjustified, given that quotations of oil products on international stock exchanges are decreasing, says the National Agency for Energy Regulation (ANRE). Prime Minister Iurie Leanca urged ANRE, the Economics Ministry and Finance Ministry to make a quick assessment of the situation on the domestic oil products market and approve new methodologies for pricing petroleum products, during a government meeting.

For its part, the Economics Ministry asked for information and a detailed analysis, so that the state could intervene in situations where oil companies violate the law. Minister Andrian Candu requested that ANRE representatives propose legislative amendments that would allow them to directly apply penalties to oil companies for not complying with the law.

The control carried out by ANRE at one of the largest companies Lukoil-Moldova, which holds 30 per cent of the oil market, has shown that it did not comply with the methodology of calculation and application of prices for oil products. The ANRE administrative board issued a prescription forcing the company to remove deviations from the methodology within 14 days. Oil companies have promised to "remove the deviations from the rules set by the methodology of assessing and applying prices for oil products."

This is the case of a single company. Generally, the oil market remains almost totally non-transparent, and the problem of the pricing always reoccurs when petrol and diesel prices increase, especially on the eve or in the middle of the farming season. Statements are made, sometimes even decisions are taken, but this does not help. There were and there still are many questions about the market’s work, but far fewer answers. Especially those related to setting prices.

Meanwhile, the things take place faster. "We need to wait 2 to 3 weeks for the 75 dollar quota," says analyst Sveatoslav Mihalache. Oil prices could drop, down to 76 dollars per barrel, which corresponds to the cost price of the extraction in Russia and USA, writes prestigious agency Bloomberg. Would this be followed by a decrease in petrol and diesel prices on the domestic market or would the opposite trend to the situation on the international market occur again?