The decision of the European Parliament to hike the minimum excise duty on diesel fuel up on par to the duty on petrol was likely to put additional pressure on inflation in Bulgaria. The increase will have an immediate impact on prices of basic goods and haulier services, Dnevnik daily said on March 13.

The hike is attributed to high demand and car makers' growing use of diesel engines.

Dimitar Tortopov, head of the retail fuel division at Eco Bulgaria said that diesel was the “social fuel” used by hospitals, schools, kindergartens and hauliers transporting most goods in the consumer basket.

Diesel accounts for half of the fuel sales in Bulgaria, with petrol and liquefied gas (butane or propane) holding the rest. Diesel prices have already soared above the price charged for the A-95 petrol, the most popular type used in the country, despite enjoying lower duties for years. The excise before the European Parliament vote was 350 euro per 1000 litres.

According to hauliers, the high prices of diesel are more due to diesel vendors' monopolistic behaviour, namely the excessively high wholesale prices of the LUKoil Neftochim refinery in Bourgas, the sole producer of oil products in Bulgaria, and claimed that large fuel distributors had formed a cartel.

Krassimir Lalov, deputy chair of the Union of Car Transportation Organisations (UCTO), said diesel producer prices in Bulgaria were higher than in Austria, even though transportation costs of LUKoil Neftochim were much lower. Lalov also asked the Commission for Protection of Competition to investigate the matter, as quoted by Dnevnik daily. Representatives of the sector are also due to soon meet Finance Minister Plamen Oresharski to discuss the problem.

Year-on-year inflation in Bulgaria rose to 13.2 per cent in February, according to preliminary statistics data released earlier this week. The figure is the highest recorded in Bulgaria since June 1998. Although officials and analysts said they expected inflation to peak in mid-2008 and then slow down, but the diesel fuel hike, as well as planned hikes to electricity, water and heating utility prices in July could throw a spanner in the works.