Expensive oil hurts transport companies
Situation could make alternative sources of energy more viable
Motorists are reeling from rising real prices of oil. According to the Polttoaine.net website, which monitors fuel prices in Finland, the average price for a litre of 95E10 petrol is EUR 1.74. The average price for diesel is slightly less – EUR 1.57 a litre.
Factors pushing up prices of gasoline and diesel fuel include the rising cost of crude oil, as well as the weakness of the euro against the US dollar, the currency of the international oil trade.
Rising diesel fuel prices are imposing additional costs on transport companies, and pricier jet fuel is raising the cost of flying. Higher fuel prices are also imposing costs on oil-heated homes, public transport, as well as energy-intensive industries, such as certain sectors of the chemical industry, says researcher Paavo Suni of the Research Institute of the Finnish Economy (ETLA).
The rising price of diesel fuel is a problem for Jukka Siili, managing director of the Helsingin Express transport company. In addition to higher oil prices on the world market, another factor pushing up the price of diesel in Finland was a 12-cent-per-litre increase in the tax on diesel fuel this year.
He says that diesel fuel accounts for nearly 40 per cent of the company’s total costs. "We cannot pass the higher cost of fuel onto prices, because customers will not agree to it."
"We cannot cope if the price of diesel fuel remains this high. Last year 192 transport companies initiated bankruptcy proceedings."
Siili says that lorries from Eastern Europe are increasingly operating on Finnish roads. "The East Europeans have significantly lower costs than we do. For instance, wages can be less than a third of what Finnish drivers earn."
Siili says that the problem of fuel theft is increasing; thousands of litres of fuel have been stolen from his company.
Siili echoes the view of the Finnish Transport and Logistics (SKAL) organisation, which has called for a fuel tax rebate for transport companies.
Paavo Suni at ETLA says that the rise in the price of oil boosts inflation, but in the current recession conditions the increase is not very great.
He also points out that expensive oil maintains structural change in the economy, which lowers the consumption of energy – especially that of oil.
"This encourages the transition to other sources of energy."
Suni says that demand for crude oil is fairly low at the moment, which means that from that point of view, there is pressure for lower oil prices. "But if growth in the world economy gets on the move, we will see some very expensive oil."
Rising oil prices also add to the costs of industry that uses it – such as the plastic industry. "The price of plastic follows the changes in the price of oil with a delay of a few months", says Vesa Kärhä, managing director of the Finnish Plastics industries Federation.
"Only two per cent of plastics are based on biomass. In addition, plastics are made of natural gas. For instance, in the United Arab Emirates, natural gas used to be burned in the desert as flare gas, but now they make plastic out of it."
Large-scale investments into biomass-based plastics would require long-term crude oil prices would stay in the neighbourhood of 180-200 dollars a barrel, Kährä calculates.
Previously in HS International Edition:
Up, up and away (again): pump price of 95E10 gasoline climbs back to EUR 1.70 per litre (21.8.2012)
Weakening of euro dampens effects of cheapened oil price (12.6.2012)
Petrol prices hit record highs in Finland (24.2.2012)