High fuel prices threaten economy

RIGA - If the price for 95 octane gas climbs higher than 1 lats (1.42 euros) per liter, this will damage the private consumption market even more, Latvija Statoil fuel trading company executive director, Sandris Steins, said in an interview with the business portal Nozare.lv. Over the past two years, fuel consumption by private consumers has dropped significantly, said Steins, adding that it was difficult to predict if this trend would continue.

Steins believes that consumption of diesel fuel will not decrease in Latvia this year - perhaps even increase slightly, whereas gasoline sales continue to gradually decrease. The activity will increase in summer, but it has to be remembered that the prices were quite different last summer, while purchasing power has not increased.

“The prime minister says that the economy is rising, that all the figures are positive, but our figures prove otherwise, and Statoil is a good indicator because we work in retail trade,” says Steins, adding that “the fall continues on a weekly basis; it is obvious that the market only gets weaker.” Steins goes on to say that each time public debate turns to high fuel prices, it is never discussed what the government is doing so residents would have more money, and how personal income could be increased. “Excise and value-added taxes are being increased constantly, but we would like to also see activity to ensure that consumers have more money,” he explains.

The government on March 29 supported an increase in the excise tax for strong alcohol, cigarettes and gasoline. The tax rate will be raised from July 1 of this year, and is part of additional income measures to this year’s budget.
The Cabinet-approved amendments are planned to bring in an additional 14.5 million lats of income this year, and in 2012 - 37.5 million lats.

According to the amendments, the excise duty for strong alcohol will be increased from 890 lats to 940 lats per 100 liters of pure alcohol. The excise duty for gasoline will be increased from 269 lats to 289 lats per 1,000 liters, which will increase the price of gasoline by approximately two santims per liter.
There will also be a gradual increase in the excise duty for cigarettes, so that by 2018 the excise duty reaches the European Union’s minimum. Saeima is still to vote on the budget amendments.

“Latvija Statoil turnover in 2009 dropped 24 percent year-on-year to 260.4 million lats, whereas profit after tax dropped 44 percent to 1.2 million lats.