TALLINN - The sweltering summer heat in Estonia has conspired with record-high fuel prices to fluster consumers and leave bureaucrats facing unexpected inflation. No matter which way one looks, there is no escaping the throes of the energy market.
Pump prices have hit record-highs, natural gas prices are set to rise, and the Economy Ministry has warned that the cost of electricity could increase 50 percent over the next 10 years.
Fuel retailers have raised prices by an average 0.45 kroon (0.028 euro), while diesel jumped by 0.15 kroon on July 11. A liter of Euro 95 gasoline at Statoil now costs 13.35 kroons, 98 Euro Ultima costs 13.85 kroons and diesel - 13.35 kroons.
Dealers said the upward trend will go on, and the price per liter will soon reach the 15-kroon threshold.
Andres Kivistik, CEO of Hydro Texaco Eesti, told the Postimees daily that gasoline prices would continue climbing and next week the company would increase its retail prices by 0.20 kroon.
Jetoil analyst Raul Magi said he would not be surprised if fuel and diesel would cost 14.50 by the end of the year. "If Parliament hits retailers with an excise tax, the price will be even higher," he added.
Other analysts pointed to the strengthening dollar - in which crude oil is priced - against the kroon as another reason for soaring gas prices.
Invest Info analyst Dmitri Andrejev said that in Estonia and Europe the price for crude is compensated by a relatively weak dollar. In his opinion, if retail gas prices reache 15 kroons, the world price will have to range between $70 and $80, and this is quite possible by the end of 2005.
And if the dollar climbs to the 2001 level 's nearly 18 kroons 's the European economy will collapse, he explained.
Helle Kirs, head of AS Eesti Statoil, told the Baltic News Service that prices were stable only thanks to strong competition on the domestic market, even though there had been pressure to raise them for several weeks in a row. Even OPEC's decision to increase daily output by 500,000 barrels won't cool prices, she added.
Fuel-dependent industries and companies are in a panic. Transportation and taxi firms are thinking about raising prices for their services. The Taisto bus company may jack up its prices in two months since it's currently functioning at a loss, the SL Ohtuleht daily reported.
Sirje Roht, head of the Tallinn Bus Company's press department, said that the firm was not able to purchase new buses since gas prices exceed budgeted estimates.
On the national level, bureaucrats are worried about the effects of crude on the consumer price index. According to the Finance Ministry, June inflation was higher than expected due to gas and food prices.
The annual growth rate was 3.1 percent, exceeding inflation in the eurozone by 1 percentage point, the ministry said.
The Bank of Estonia forecast average price growth of 3.4 percent this year.
Overall, however, energy prices are fixed to rise steadily in the future. A recent Economy Affairs Ministry report forecast that the price of electricity would rise some 50 percent over the next decade, and an even more dramatic ascent could not be ruled out, the report added.
Ando Leppinen, who defended the ministry's development plan last week, said that there was much uncertainty in the formation of the electricity generation price and that Estonia's electricity market would be open as of 2013. Then competition would be a key factor in determining energy prices.
Meanwhile, Russia's Gazprom has hinted in recent weeks that it would like to raise natural gas prices for the Baltic countries to Western European levels 's or from $50 - $60 per 1,000 cubic meters to $160. The country's State Duma (lower house of Parliament) last week passed an appeal to the government to do just that.
