1. Introduction

Through this paper we are going to analyze the Albanian oil market and its dependency on imports. Oil is a very important product as a necessary good in the productive process which sustains economic growth. So the demand for oil is in higher levels in the most developed countries such as United States of America (USA), China and Japan.

In our country the demand for oil has increased, especially related to the increment of the economic growth. The internal production covers only the 20% of the total demand of oil, so the 80% of it comes covered by the imports, so our dependency on imports is relatively high. Because of this the internal price of oil is highly related to every development in the world oil market. We are going to analyze this dependency on imports and the impact of the world market on our internal market further at our paper.

At first were going to talk about world oil market and give an overview of this market, so to understand how the world oils price reflects on the domestic market. After this we are going to analyze the Albanian oil market by giving a whole picture of it: demand, supply and price. But we will go even further by comparing the situation in Albania with the world market. At the end of the paper we would have explained why the Albanian oil market is in the way it is, how the internal prices reflect the world ones.

2. World Oil Market

Today, in the world market, oil is one of the most used products due to advanced technologies that occur every day. First of all, it's consumed by cars, and following up to factories etc, but being a non-renewable resource, someday it will reach its peak production. The oil -sale market estimates its price for a gross-barrel. Increasing of oil prices, due to global crisis makes investors to invest less, until the economies of countries are more secure. No consumer or business is able to make long term plans because the price diversion of fuel makes living unsecure. Consequently the uncertainty in the economy grows and people tend to protect themselves, by reducing consumption.

2.1 World Oil Consumers

The main consumers of the oil demand, at around 2/3 of production, are the most industrialized countries as stated above:

Tab.1 Consumers of oil











Source: Nation Master (2007)

(Its measuring unit is in million barrels / day)

As seen from the table, the main country in oil consumption is USA, this due to the fact that she is one of the most industrialized countries in the world.

The biggest part of oil consumption in the United States goes for transportation and USA has more vehicles per capita from any other country in the world this is one of the main reasons why United States it's the first of oil consumption but it's not the only one. After transportation the most of oil consumption goes for space heating and power generating since USA is the third country regarding population a lot of oil it's necessary. The economy of United States is the largest national economy in the world and industries and different businesses need a considerable amount of oil to operate. Those are some of the main reasons why United States it's in the first place regarding oil consumption and following up we have countries like China, Japan, Russia, Germany, which have a high demand as well.

2.2 World Oil Producers

Organization of Oil Exporting Countries (OPEC), cartel of oil producing countries, produces at about 40% of crude oil daily consumption and at about 65% of gas reserves. OPEC is the group of the richest countries which coordinate oil production policies. The largest resources of global supply are as follows:

Tab.2 Producers of oil











Source: Nation Master (2007)

(Its measuring unit is million barrels /day)

The middle East it's the most critical supply of oil and natural gas in the world and it is obvious from the data presented in Tab nr.2 that Saudi Arabia leads in the production and extraction of oil, since it is extremely rich in oil reserves and resources, but it's worth mentioning that Saudi Arabia has the lowest cost of producing oil in the world this makes it a profitable business but certainly not to be left behind are Russia and other countries as well.

3. Albanian Oil Market

Albanian oil market has been liberalized since 1999 and is defined by law: N.8450 / 24.02.99, decision of the Council of ministers 129 / 18.03.99 and amendment 179 / 25.04.02

Recently, oil price, in the international market, has experienced a decrement, which is not reflected in the Albanian market. According to Minister of Economy Ridvan Bode it is noticeable in the difference of the oil price between international levels (44 dollars/ day), and the domestic market (currently 130 lek/ l). Also according to the same source a few months ago, the Albanian market was characterized by a stable period, but lately we notice an increase of 2 to 3 lek / l. This was obtained as a result of domestic currency depreciation, and also because of the price growth in scholarship. Increasing the price brings a supply shock, therefore brings an increment of the input cost, and that of production. So an increase of the oil price is followed by a reduction of revenues and a reduction of expenditures for other goods.

According to Erion Brace the annual income it's:

For The extraction of oil operate 3 companies: "BANKERS"-78 mln �; "ALBPETROL"-56.6 mln �; and "Oil & Gas Stream"
For the processing is one company: ARMO-182.6 mln �;
For the dismissal, storage and transportation it's one company: LA PETROLIFERA- 32.4 mln �;
For the trading are six companies: KASTPETROL- 93.1 mln �; TACI OIL- 81.6 mln �; VILOIL-76 mln �; GLOBAL- 47.7 mln �; MAMIDOIL-33 mln �; EKO A2- 17.7 mln �;

The Search of oil is actually in a monopoly conditions
In this market, the Government has contracted 3 companies but one the Swiss company DWM Petroleum AG has won the governmental agreement with the right to exercise the activity of research in over 80% of the territory.

The Extraction of oil is liberalized and in this field 3 companies are operating, "Bankers Petroleum" (area of Patos-Marinez), "Oil & Gas Stream" (in 4 deposits, Hekal, Cakran, Kocul, Delvine), Albpetrol (a small part of deposits)

The Processing of oil within the territory of Albania is practically a monopoly, because of a privatization process from government with the Armo Oil Company.

Deposit of oil results generally liberalized service, although the company Petrolifera Italo-Albanese, has the exclusive power in the area South of the country, marine part, for dismissal, storage, transportation of oil by exploiting established plant in Vlora.

4. The Demand

This section will be based mainly on the data of Index Mund (2009). In Albania, oil has more than 300,000 daily consumers. This consumption from year to year it undergoes growth because oil gains more and more importance in the consumers' lives. The number of businesses grows day by day, as the number of vehicles that use oil as fuel does as well. This brings an increase in the oil demand where without it many activities would not be carried out and different needs would not be fulfilled. In Albania, 70% of oil consumption goes to transport, 25% to industries, and 5% for other needs.

To check the consumption of oil and its performance during the last years ,we have presented below a diagram where the horizontal axis stands for the years and the vertical one for consumption.

As seen from the graph, the demand of oil from 2005-2009 gradually grows, the reasons of which were mentioned above. In 2005, oil consumption was 7500 BBL / day.

In 2006, consumption has increased up to 25.200 BBL / day, which has remained stable even in the following year. So there has been a very high growth in 12 months. While in 2008, it has increased, even though in lower levels, and has reached 30.900 BBL / day. In 2009 it has increased very slightly from 2008 and has reached about 31.000 BBL / day. So it is evident that passing from 2005 to 2006, the oil demand has been growing very fast, which means that the pace of the economic development and our prosperity has grown as well and consequently has increased the demand for fuel, the oil.

5. The Supply

The oil supply consists of domestic production and imports. According to the annual report of competition authority (2009). In Albania, different companies operate in the oil market but of the greatest importance is Taci Oil with 48.03% and Kast Petrol with 44.17%. The others companies which occupy a small part of the hydrocarbons market are Europetrol 4.50%, Ada Petrol 1.30%, Global Petroleum 0.99%, Alpin SHA 0.73% and Kin Albania 0.28%.

In the following diagram, we are presenting the domestic production from 2005-2009 where the horizontal axis stands for the years and the vertical one for the amount produced.

5.1 Domestic production

Domestic production, as shown by Fig.2, during 2005 was 2000 bbl / day. Later on has experienced a growth from 2005 to 2006 and reached 3500 BBL / day. During 2006 and 2007, the domestic production has not changed and remained 3500 BBL / day. While during 2008 and 2009, the domestic production incurred a considerable increment, which reached its peak with 6425 BBL / day. This growth was attained due to the increasing of oil demand.

5.2 Imports

The difference between export and import represent the balance of trade. We have a demand for import when domestic quantity demands exceeds domestic quantity supplied, or when the price of the good in other countries is lower than in the domestic market. An export is a product shipped from a country into another country.

Nx =X - I

A favorable balance of trade is known as a trade surplus and consists of exporting more than it's importing, an unfavorable balance of trade is known as trade deficit that happens when imports are more than exports.

Our country has few reserves of this product, which means that domestic production cannot fulfill the requirements of the domestic market. As a result it is necessary that most of this product is to be imported from other countries. As a result our oil price in the domestic market is very connected to the developments of the world market. Since the domestic importers do not have sufficient stocks to protect the consumers from price changes in international markets, the change of the latter has an immediate influence in the domestic market.

As we see in fig.3 the quantity of imported oil in 2005 has been much smaller than the import of oil in the coming years. So, in 2005 the quantity of imported oil was approximately 5500 bbl/day and the next year this quantity was increased in 21600 bbl/day equal with the imports in 2007, 4 times bigger than in 2005. In 2008 and 2009 this quantity was in the same level, and of course bigger than the previous years, achieving 24860 bbl/day. We can see that the import of oil has increased during 2005-2009, having a bigger increscent during 2006 compared to the previous year. This increscent was related to the increment of the economic growth during these years.

To study the dependency on oil imports of Albania we have divided the amount of imports to the amount of consumption respectively:

Each Year: Imports/Consumption * 100%

Year 2005: 5500/7500 * 100% = 73.3%

Year 2006: 21600/25200 * 100% = 85.7%

Year 2007: 21600/25200 * 100% = 85.7%

Year 2008: 24860/30900 * 100% = 80.4%

Year 2009: 24860/31000 * 100% = 80.1%

As we see Albanian depedendency on imports it has come always bigger. In 2005 has been 73.3% and in the 2006 has had the biggest growth with 12.4% this has come as a result that oil demand has had a big growth and domestic production a smaller one. In 2007 dependency was constant but in 2008 we had a small reducement of 5%, this as a result that domestic production had a greater increase than the consumption and in 2009 we had another ruducement of 0.3%.

6. Conclusions

As we analyzed the world and Albanian oil market, we conclude that oil is a very important product, as a necessary good in the productive process. Albanian oil market is an oligopoly, because only three big companies operate in this market.

As a result of the small amount of oil produced in our country, the amount of imported oil is in high level and it comes bigger but the last two years the dependency it's 5% lower this as a result that the domestic production had a greater increase than the consumption. As mentioned above the imports cover the 80% of the total demand, which means that the import of oil is a necessity for the Albanian economy.

Even though the increscent of the world oil price the demand for oil has had always an increasing tendency; which confirms the inelasticity of demand, usual fluctuations in prices doesn't cut down selling.

7. Glossary

Market: Market it's a place where is voluntary buying and selling of goods, services or both.

Demand: Represent the quantity of good or service a consumer is ready and capable to buy for a certain price.

Supply: Represent the quantity of good or service a producer is ready and capable to offer for a certain price

Domestic Production: Goods and services produced in a country

Imports It's a product or service that a country gets from another country because of better quality or lower price

Exports: Are goods that a country produces more than it can consume in order to ship in other countries for a profit.

Balance of trade: It's the difference between monetary value of exports and imports of output in an economy over a certain period.

8. References

Nation Master: accessed: 22.01.2010

Nation Master: accessed: 22.01.2010

Index Mundi Albania: accessed: 25.01.2010

Index Mundi Albania: accessed: 25.01.2010

Ahmet Mancellari, Dhori Kule , Sulo Haderri, Stefan Qirici "Hyrje ne Ekonomi" Shtepia botuese "Pegi" Tirane 2002 (pp. 257)

Fjala Shkoder: accessed on 30.01.2010

Index Mundi Albania: accessed: 25.01.2010

Sot: accessed on 30.01.2009

The Report of competition authority of Albania (2009) accessed on 03.02.2010

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