Consumer price of petrol near all-time high
Transportation industry beginning to speak of tax cuts
|
|
|
The consumer prices of petrol and heating oil are approaching their all-time highs. Finnish consumers have paid more for their fuel only in the early 1980s.
Consumer prices are affected by the world market price of crude oil, which is at a record level, as well as by exchange rates. The price of crude oil in dollars has broken records almost daily this summer, but the weakening of the dollar has aided consumers in the euro area somewhat.
Without the help of the exchange rate, previous records would already have been broken in Finland.
When inflation is taken into account, the euro-denominated price of crude oil is currently only half of the level of the early 1980s. The consumer prices tell a different story: petrol taxes have been raised repeatedly since the 1980s, and two thirds of the pump price of petrol is made up of taxes nowadays.
Due to the tax hikes, petrol costs almost as much at the pumps as it did in the early 1980s. At the time, the price of petrol was over 1.2 euros per litre, after corrections for inflation. Motorists could still purchase petrol for under 1.2 euros in Helsinki earlier this week, but the price will rise further if the value of crude oil continues to rise as well.
The heating oil used by private households is also nearly as expensive as twenty years ago.
Expensive petrol spells difficulties for the transportation industry in particular. No serious discussion on lowering petrol taxes has yet begun in Finland, but the head of Finnish Transport and Logistics demanded on Tuesday that the state lower taxes.
Research Professor Jaakko Kiander from the Government Institute for Economic Research counters that petrol taxes should not be cut when prices are high. A reduction in consumer prices in Europe would lead to a jump in demand, which would only raise the world market price of crude oil further.
Sooner or later this would again lead to price hikes at the petrol stations, and consumers would be no better off. Also, the state's tax revenues would fall, with a larger share of the higher price flowing to oil producers.
If Finland was the only country that cut its petrol taxes, the situation would be different, as an increase in Finnish demand alone would not yet affect the world market.
Helsingin Sanomat
