Tax hikes, bio-fuel rule raise fuel prices

State to get estimated EUR 300 million in additional revenue

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The increase in the tax of diesel fuel and petrol from the beginning of the new year has pushed up pump prices by just under ten cents a litre in a couple of days.
      The price of a litre of 95-octane petrol was an average EUR 1.41 in the Helsinki region on Wednesday, and that of diesel fuel was EUR 1.21, according to the website www.polttoaine.net, which keeps tabs on fuel prices. In Inari in Finnish Lapland, the price of gasoline was already at EUR 1.51 a litre on Wednesday.
      The tax increase accounts for about five cents of the higher price, says Jouko Helin, manager of retail sales for Neste Oil.
     
Another factor pushing up the price is the requirement that fuel on sale should contain at least two percent of substance produced from biological sources.
      The biological fuels are more expensive than the basic products. "At present prices, they push up consumer prices by a couple of cents a litre", Helin says.
      The remainder of the significant price increases is attributed to the high world market prices of both crude oil and refined fuels, which have risen to new records in recent months.
     
Taking a calm view of the price rises is Jarmo Nupponen, managing director of the Finnish Oil and Gas Federation, which represents the interests of fuel distribution companies.
      "The purpose of taxes is to collect revenue for the state. The government's programme states that EUR 300 million is to be collected from energy taxes. We calculate that the money will come from these increases in fuel taxes", Nupponen says.
      He adds that the new tax hikes are the first in five years.
      About 65 per cent of the retail price of 95-octane fuel and about half of that of diesel fuel is tax.
      According to figures put out by the Finnish Oil and Gas Federation, the state collected about EUR 4.3 billion in various taxes and fees linked with fuels in 2006.
      The transport sector also took a calm view of the tax hikes, although Iiro Lehtonen, managing director of Finnish Transport and Logistics (SKAL), says that it is bringing considerable price pressures.
      Both Lehtonen and Tapio Mäkinen, CEO of the transport company SE Mäkinen, say that the higher fuel taxes and ongoing pay negotiations could lead to pressures to raise prices by more than ten per cent this year.
     
Transferring rising costs to customers has often been difficult in transport, where the large number of entrepreneurs and intense competition in the sector have pushed prices down.
      "But now a change has taken place: the number of entrepreneurs has been declining for several years", Lehtonen points out.
      He believes that a better balance between supply and demand, and the increasingly businesslike approach in transport are improving the negotiating positions of transport companies.
      "It's never easy, but in the long run, costs should be included in the contracts", Mäkinen says.


Links:
  Polttoaine.net (in Finnish)

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