RIGA - Faced with skyrocketing gasoline prices and a new threat of inflation, the Economy Ministry has asked Brussels for permission to import gas and oil products from Belarus and Russia. The government may be forced to take unilateral action if the EU does not grant permission, Prime Minister Aigars Kalvitis said in a press conference on Sept. 8.
Gasoline from Belarusian and Russian refineries does not meet EU requirements on environmental safety due to its high sulfur content, yet Latvian Environ-ment Minister Raimonds Vejonis said he would support its use despite being against the idea inherently.
However, Energy Commissio-ner Andris Piebalgs, who is Latvian, said in an interview to Latvian Television that it would be unlikely that the government would get permission to import cheap Belarusian gas.
Even if approved by Brussels, the scheme would have only a temporary effect on prices, Piebalgs explained. The price per liter climbed to 0.70 lat (1 euro) on Sept. 5, a record high, though it retreated slightly as Lithuania's refinery adjusted its prices after coming under fire from its own government. But by Sept. 13, prices had returned to the previous level of 0.65 lat per liter.
With many across the country feeling the pinch of higher fuel prices, politicians have been quick to throw blame around. Guilty were monopolistic practices and incompetent bureaucrats. Finance Minister Oskars Spurdzins suggested that the EU allow Latvia to postpone increases in the excise tax that are scheduled to place the Baltic state in parity with the rest of EU members.
Other possibilities have also been suggested, such as opening the EU's strategic reserves to lower prices across the continent, but without a clear path to lower prices, politicians hunting for culprits.
Economy Minister Krisjanis Karins suggested that Lithuania's oil refinery, Mazeikiu Nafta, the only one in the Baltics, was at the core of the problem. The refinery provides over 80 percent of Latvia's oil products.
Prime Minister Kalvitis pilloried the Competition Council, claiming it had not ensured sufficient competition to keep prices 's including for foodstuffs 's down. He went so far as to say that the head of the council might have to leave his post.
Speaking in an interview with the daily Diena, Piebalgs said that fuel prices were unlikely to come down before 2007.
Statoil, one of the largest chains of gas stations in the Baltics, said in a press release that at the beginning of the month the price per ton of oil (7.3 barrels) soared by $200 within a week's time. Each $100 increase adds 0.05 lat to the price of gas in Latvia, the company explained.
For Latvia, the jump in energy prices is particularly scary since the country is battling runaway inflation. The annualized rise in the consumer price index amounted to 6.1 percent at the end of August.
At the same time the country is undergoing its most remarkable spurt of economic expansion since expansion, with GDP catapulting 9.5 percent in the first half of years. PM Kalvitis has even expressed concern that the economy will overheat. (See story on Page 8.)
Meanwhile, the other Baltic states fretted over pump prices in their own way. A report surfaced in Estonia that the country might not be able to introduce the euro on time due to the average Estonian's rising fuel costs. According to the Statistical Office, consumer prices rose by 4.2 percent year-on-year by the end of August, considerably higher than the margin allowed for euro adoption.
"In Estonia the share of fuel in the shopping basket is bigger than in other EU countries," Hansabank analyst Maris Lauri was quoted as saying. "So one third of the inflation is due just to the rise in fuel prices."
In Lithuania Prime Minister Algirdas Brazauskas said on Sept. 12 that the government might take measures to rein in gas prices. "Naturally, we will not lag behind the others, and if we have any possibilities, we will do something, will raise proposals," Brazauskas, referring to other EU members, told reporters.
Lithuanian motorists took things into their own hands, with many opting to install liquefied petroleum gas equipment in their cars. The Verslo Zinios business daily reported that the number of LPG buyers doubled, with consumers preferring to buy more expensive Western LPG equipment.