Surcharge to 'more than double'

The fuel surcharge is expected to more than double in the coming days, surpassing the 100 per cent mark, as the government grapples with record oil prices and expired hedging agreements, The Sunday Times has learnt. Local analysts are even warning that the government may impose a threefold increase in the surcharge if the international oil crisis persists.

An announcement from the government is expected imminently, just as many Maltese families turn to electric fans and airconditioners to cope with the summer heat.

Consumers' pockets already took a hit last week when Enemalta announced a rise in the price of petrol, diesel and paraffin. A hefty surcharge increase is bound to add to the financial pressure faced by many as the worldwide crisis takes a grip on Malta.

The surcharge is applied to water and electricity consumption - not meter rental - though around 30,000 low-income households are exempt from paying the additional charge.

The surcharge structure was introduced as a temporary measure in January 2005, when the price of oil on the international market started its upward climb. At the time, the government had said that the surcharge would be phased out once oil prices returned to post-2005 levels.

However, the price of crude oil shot up from $40 a barrel in January 2005 to $93 last December. And it made a further jump this year, shooting to a record $142 this week (an increase of 238 per cent).

According to some indicators, the price of a barrel of oil may even climb to a whopping $200 by the end of the year.

Although Enemalta is not buying all its oil at the current rate, thanks to its hedging agreements, it is still ending up paying much more than it did a few months ago, Finance Minister Tonio Fenech had said.

Speaking to reporters recently, Prime Minister Lawrence Gonzi said the government was studying the possibility of abolishing or radically revising the utilities surcharge mechanism and introducing new tariffs reflecting prevailing market oil prices.

Together with Cyprus, Malta is the most conventional fuel-dependent country in the EU. In 2006, Malta produced only 0.3 per cent of all its energy needs from renewables, the lowest level in the EU. Dr Gonzi has said that Malta will soon be launching a multi-million euro initiative for the development of an offshore wind farm.

Despite the oil crisis, EU leaders ruled out the possibility of intervening in the market by introducing one-time fuel tax cuts. According to the EU, this will not be effective in the long term, particularly as oil prices are expected to continue to surge in the coming months.