In the last quarter of 2020, the average inflation rate in the EU was 0.3%, around the same as that in Malta. This is considered low, by historical standards, as the the ECB’s target inflation rate is around 2%. By March 2021, inflation in the EU had risen close to this target, reaching 1.7%, with some countries such as Germany, Luxembourg and Austria reaching the ECB target rate. On the other hand, in Malta, inflation travelled in the opposite direction, falling to 0.1%.
One of the key reasons behind this diverging path are fuel prices. Data published by the European Commission’s Weekly Oil Bulletin, shown in the graphs, shows that since the beginning of the year there has been a steady rise in fuel prices across Europe. Petrol prices started the year at an average €1.32 in the EU, but by the end of April they had risen to €1.46. This marks an increase of more than 11% over just four months. The highest increases in petrol prices were in the Netherlands, Ireland, Czech Republic, and Finland where prices rose by a steep 16c per litre.
The picture is somewhat less dramatic when one looks at trends in diesel prices. Here the rise across the EU was from €1.20 to €1.30, marking an 8% increase. However, there were several countries where diesel prices surged higher than that. For instance, in Ireland diesel prices were up by 15c, whereas in Latvia and Poland, they went up by 13c.
Now one might wonder why Malta is not included in the charts above. This is because Malta is the only country in Europe where prices have not risen in 2021. While the rest of European motorists faced increases of over 11%, Malta’s fuel policy ensured stability. Had Malta followed the trends seen across the EU, petrol prices would have increased to €1.49, while that for diesel would have risen to €1.31. Instead, Maltese consumers saved 15c per litre of petrol and 10c per litre of diesel.
Malta is the only country in Europe where prices have not risen in 2021.
Petrol prices in Malta are currently 12c cheaper than the EU average. Diesel costs 9c less. The most expensive petrolin Europe is found in the Netherlands, where motorists pay 43c more than in Malta. The most expensive diesel prices are in Sweden, with a difference of 36c compared to Maltese prices. This difference mostly lies in the heftier taxes imposed by EU Governments.
The current divergence in fuel prices is no quirk. Since April 2013, petrol prices in Malta are down by 17c or by 11%;while diesel is 19c, or 14% cheaper. Across Europe during the same period, petrol prices fell by 10c, or 7%, while diesel is down by 12c, or 8%. In six weeks out of ten since April 2013, both petrol and diesel prices were lower than the EU average.
Petrol prices in Malta are currently 12c cheaper than the EU average. Diesel costs 9c less.
This contrasts with the situation recorded between 2008 and 2013, where petrol prices in Malta rose by 39c while anddiesel prices were hiked by 36c. This meant a rise of 36% and 35% in petrol and diesel prices, respectively. One of the main reasons often cited for this price hike is the rising international oil prices. However, despite facing the same oil crisis, the rest of the EU saw a rise of only 21% in the price of petrol and 17% in the price of diesel.
Therefore, while in the 2008-2013 period, fuel prices in Malta rose at twice the EU average, since 2013, prices have fallen by one and half times the EU average. This is one of the main reasons why Malta’s current inflation is much less pronounced than that in the EU.