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The Big Oil Bet That Went Bad

The Big Oil Bet That Went Bad

Big oil's bet on the…

Europe Loses Billions Each Year to Fuel Theft and Fraud

Theft, fraud, and smuggling are becoming a big problem in Europe’s petroleum industry. Bloomberg described a case that highlighted the ease with which some daring groups can steal huge amounts of fuel:

A watchman on duty at the MiRO plant in Karlsruhe, Germany’s largest oil refinery, would send a text message once the security guard was out of site, advising a truck driver that it was safe to leave with the 10,000 litre tanker of stolen diesel.

In just over a year, the watchman helped steal 87 truckloads of diesel, and earned himself €300 euros ($400) for each job. The scam was finally discovered, only when one of the group of thieves was fired, and then went to the police.

Growing activity of theft, smuggling, and fraud costs European governments an estimated €100 million to €1.3 billion every year, and the increase in crime is being blamed on the high retail prices of diesel, which are up 52% since 2009.

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Tom Noonan, the chief executive officer at Maxol Group and chairman of the Irish Petroleum Industry Association, explained to Bloomberg that “this criminal activity is undermining the fabric of the legitimate petroleum industry and the state, at a time when economic challenges have never been so great. Illegal activity has been allowed to grow to such a large scale unimpeded.”

Data from individual governments shows that the fraud in Western European countries such as Germany is dwarfed by the activities in Eastern Europe. For example; in Poland, more than 13% of the diesel market is met by untaxed supplies, and in the Czech Republic close to 20% of all fuel consumed is illegal.

In 2012 the Polish government lost 3 billion zloty ($943 million) due to fuel tax fraud, the UK lost over £1.1 billion ($1.7 billion) in the 2008-2009 tax year, and Greece is apparently losing out on €600 million each year.

The loss of revenue to crime is especially squeezing some economies as revenues are already down, with refineries earning just $4 a barrels profit in Northwest Europe last week, compared with $8 a barrel last year, and $20 a barrel in 2008.

By. Charles Kennedy of Oilprice.com



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