Experts against fuel price intervention despite hike

Inflation in Finland hit 7.0 in May for the first time since February 1990, Statistics Finland has reported, with soaring fuel prices one of the main factors behind the rise.

Two years ago, the price of 95 quality in Finland was around 1.3 euros per liter, but it exceeded two euros this spring. Fuel prices continued to rise in June, reported Xinhua, quoting Statistics Finland on Tuesday.

In the week beginning June 6, the price of diesel was 2.34 euros, 95E cost 2.53 euros, and 98E was 2.63 euros. The diesel price had remained almost unchanged during April and May, but began to rise again in June.

High fuel prices could affect caravanning this summer, said Jukka Kujanpaa, chairman of the Finnish Federation of Camping, Caravanning and Motorcaravanning in Pohjanmaa. Therefore, local tourism will be crucial.

As average pump gas prices in Helsinki reached 2.5 euros per liter, consumers polled by local media said they may have to shorten their summer holidays.

From Tuesday, the shipping company Wasaline will switch to using only liquefied natural gas (LNG) due to the rise in market prices for fuels. Drastically rising costs will continue to guide decisions, said Wasalin's CEO, Peter Stahlberg.

Meanwhile, public transport authorities are emphasizing the savings to be made by leaving the car at home.

"For the price of a 20-liter gas purchase, you can get a month's pass for transit," says one ad.

In Helsinki, the share of public transport in commuting to work was 59 percent in 2020, down 13 percent from 2019 due to employees working from home during the pandemic.

However, in rural areas which are less well connected to public transport networks, a car is often a necessity.

In the central Finnish town of Jyväskylä, use of public transport has been around ten percent, but the city aims to double this by 2030.

Since bus and tram operators are paid by the cities, ticket prices can be capped. In Jyväskylä, city director Timo Koivisto pledged in May that the city would absorb the cost increase, and not raise the price of tickets.

The government increased the tax concession for commuting to work in the spring, and assisted transport industries. However, it did not ease the country's high taxation on petrol products.

As of June 6, according to official information from Globalpetrolprices.com, Finland has the third-highest gas price in Europe.

The MAIN opposition Perussuomalaiset (Finns Party) and the Finnish motorist association Autoliitto have demanded that the government reduce the fuel oil tax. Such a measure has already been introduced in Germany.

However, leading Finnish economists have cautioned against state tampering with fuel prices. Saara Kurronen, an economist for industry-related think tank EVA, underlined that Finland is a market economy: the markets set the prices, and attempts to affect them are expensive and inefficient.

A general relaxation of fuel tax would not ease the situation of the less affluent, Kurronen said, since it is middle and high-income groups that tend to spend most on fuel.

Meanwhile, Marita Laukkanen, a leading researcher at the State Economic Research Institute (VATT), said a marked fuel tax reduction would cost the government thousands of millions. Nevertheless, there is no proof that such a cutback would be reflected in retail pump prices or the industry's profits. "There is no such government data available," she added.

On May 21, Finland's state-owned gas company Gasum announced that imports of natural gas to Finland from Russia had been halted. One week earlier, Russian state-owned company RAO Nordic cut off all electricity exports to Finland. Finnish energy company Neste has also ceased imports from Russia, but uses crude from other world markets.

Officials say that no supply problems are expected in Finland.

Olli-Pekka Rantala, director general for services at the Ministry for Transport and Communications, said that Finland has enough gas reserves for five months, as well as a rationing system that could be activated if necessary.