Do high taxes on oil prices in Albania affect the inflation rate?

High taxes on the price of oil in Albania have a direct, but also indirect impact on the increase in product prices.

First, let’s clarify the structure of taxes on the price of oil.

For every liter of oil sold in the Albanian market, the government collects several taxes, such as:

Excise duty: 38 lek per liter

Turnover tax: 27 lek per liter

Carbon tax: 3 lek per liter

Additional tax: 7 to 10 lek per liter.

The impact on daily life in various activities and families is seen in several ways:

First, there is the increase in transportation costs

Oil is an essential component for the transportation of goods and services. When the price of oil increases due to high taxes, transportation costs increase significantly. These costs are transmitted to businesses, which then pass them on to the consumer through higher product prices.

Second, there is the impact on domestic production.

Many manufacturing sectors in Albania rely on fuel for machinery, energy and logistics. High oil taxes increase operating costs for these sectors, affecting the final price of domestically produced products.

Third is the domino effect on the import and export market.

Due to the high dependence on imports, any increase in transportation costs (caused by oil taxes) increases the price of imported goods. On the other hand, the increase in oil costs harms the competitiveness of Albanian exports in international markets due to high production and transportation costs.

Fourth is the impact on other economic sectors

Sectors such as agriculture are highly dependent on oil for equipment, machinery and transportation. For example, in the agricultural sector, farmers face high oil prices, affecting the increase in production costs and, consequently, the prices of agricultural products.

Services and trade also have the same impact, depending on the use of oil in their activity processes.

This situation particularly burdens low-income families, who have to face higher prices for essential goods.

High taxes on oil thus create a chain of effects in the economy, increasing transport and production costs and leading to an overall increase in the prices of products and services.

High taxes on oil contribute to inflation, as products and services become more expensive. As a result, the purchasing power of consumers falls, negatively affecting domestic consumption and economic growth.

This directly affects the well-being of citizens and can hinder the country’s economic competitiveness. To mitigate this impact, measures such as reducing taxes on oil, diversifying energy sources, or stimulating local production to reduce dependence on imports can be considered.

Comparison with other countries

In 2024, the average price of oil in Albania was 1.8 euros per liter, while in North Macedonia it was 1.3 euros, in Slovenia 1.4 euros and in Austria 1.35 euros.

In conclusion, high taxes on oil in Albania have a significant impact on the increase in the prices of products and services, directly affecting the economy of Albanian households and the competitiveness of local businesses.