Fuel prices hit record highs
Finland seen as less vulnerable than many other countries
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Nominal fuel prices have hit record highs in Finland.
At many filling stations, a litre of petrol is going for more than EUR 1.30. Matti Peitso of Neste Marketing says that 132.9 cents is a fairly common price at Finnish gas pumps.
Heating oil is also more expensive than ever. On Monday, a litre of heating oil cost EUR 0.63. The previous inflation-adjusted highs for heating oil were in the 1980s, and in the early part of this decade, when the price for a litre was the equivalent of 60 of today’s cents.
Jukka Pennanen, head of development at Neste Marketing, believes that the price rise could continue.
If inflation is taken into account, Friday’s quotation of 67 US dollars per barrel on the world market is actually lower than in 1980, soon after the Islamic Revolution in Iran. At that time, the price of a barrel of oil was the equivalent of 82 of today's dollars.
Pekka Purho of Neste Oil says that only a sharp drop in economic growth accompanied by a clear decline in consumption can lead to a long-term decline in the price of oil.
The high price of oil itself is a factor that could actually stop growth, but so far, the impact remains minor.
"Expensive oil does not seem to harm countries experiencing high growth, such as the United States and China", says Professor Jaakko Kiander of the Technical Research Centre of Finland (VTT).
"In industrialised countries oil is still so cheap that growth can continue. In Africa and in very poor countries, the impact can be very big. Tractors are left on the side of fields if the farmer cannot afford to buy fuel", says Bank of Finland economist Pentti Forsman.
Professor Kiander nevertheless feels that a crisis is looming. He says that if oil rises to between 70-80 dollars a barrel, it will reduce consumption, and will slow economic growth both in Finland and the rest of the world.
The high cost of fuel has not yet affected Finnish driving habits. Petrol consumption has continued to increase this year, although the growth has been modest.
The continued growth in consumption of more expensive fuel is attributed to the greater growth in disposable income. Forsman notes that when measured against per capita income, the price of fuel in Finland is not yet at a record high.
Jaakko Kiander says that Finland can endure high oil prices better than many other countries. He notes that the mechanism is similar to the bilateral trade practiced between Finland and the Soviet Union during the time that Urho Kekkonen was President. This means that Finland buys its oil from Russia, and as the increased oil revenue boosts Russian prosperity, so Russia is able to increase its imports from Finland.
Helsingin Sanomat
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| 16.8.2005 - TODAY |
 Fuel prices hit record highs |
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