Frustration over fuel price increases

It is of very little consolation that energy prices in a number of European countries are higher than those in Malta. With the latest sharp rise in the price of petrol, diesel and, now, gas, consumers can hardly be blamed for expressing frustration at the rising cost of living. More so when considering that the wage rates here are not exactly comparable with those payable in the more industrialised countries in Europe.

True to form, the Labour Party is already exacting every ounce of political mileage it can get out of the price rises. At the same time, it fails to give a convincing clue as to how it would tackle the situation in the event that the electorate decides to put it in power at the next election. Between now and the time Malta goes to the polls, the energy price is very likely to remain high, playing havoc with the efforts of so many countries to recover from the impact of the austerity measures being taken by governments to cut their countries’ deficit and debt.

In Malta’s case, the evolving situation can become even more difficult than it is now. According to the Finance Minister, the government is already “soaking up some 30 to 40 per cent of the additional cost of the current electricity tariffs”. Up to only recently, the figure given was of 25 per cent. The cost to the government is therefore rising sharply, exerting new pressures in its work to control the deficit as required by EU rules.

When the government had first sharply raised the energy tariffs, the argument was that the time had come for consumers to start paying the commercial price for energy. The government’s aim was to do away with the subsidy it had been giving the energy corporation, Enemalta. This made a great deal of sense though, had it been wise enough at the time, the government could have raised the energy tariffs gradually, thereby easing the burden and avoiding all the flak it had justifiably got through the sudden price shock.

However, the sharp rise in the price of oil has now changed the parameters of the situation again, for to what extent can the consumer shoulder the burden? Up to what level can industry and tourism take increased energy costs without seriously jeopardising their position in the markets in which they operate?

Insofar as the consumer is concerned, the Prime Minister, Lawrence Gonzi, has already gone on record saying that Maltese families had suffered enough and that the government had no intention of making things worse for them.

Finance Minister Tonio Fenech has said that it would be a catastrophe if the government were to charge consumers for the actual price of oil. “We are waiting and hoping that the Iran situation calms down so we can hedge at a favourable price.” It would seem that the immediate solution lies on this hope.

The rises in the prices of petrol, diesel and gas will inevitably hit both the consumer and the economy but the government is hardly in a position to absorb more than it is already doing without falling foul of its own targets.

The possibility of getting oil at a cheaper rate from Libya is welcome news but surely it is far too early in the day to factor in such a possibility in the government’s operations when, according to the Finance Minister, the talks are still in an early stage.