The Fuel Price Conundrum: What Is Europe Doing, and What Should Lithuania Do?

„Fuel prices offer no respite, and an even more expensive heating season lies ahead. This presents a headache for the entire European Union. What is to be done?

 

Lithuanian Prime Minister Mindaugas Sinkevičius says the country is awaiting the European Commission’s plan of measures to manage high fuel prices. In the meantime, EU Energy Commissioner Dan Jørgensen has urged member states to reduce gas and electricity consumption, as lower demand could help alleviate the issue of high energy prices.

 

"It seems to me that consumers see this for themselves—as prices rise, they consider where they might save money," energy expert Vidmantas Jankauskas said, commenting on the situation for the *Žinių radijas* program "Gyvenu Europoje" (Living in Europe).

 

According to the expert, the biggest problem for all of Europe—Lithuania included—is currently the price of diesel.

 

"Diesel has emerged as such a massive problem that, while gasoline prices have risen by a quarter since the start of the conflict involving the US and Iran, diesel prices have surged by 40 percent. That is the main issue," he emphasized. Jankauskas views with skepticism the decisions by states to release additional diesel into the market to ease pressure, describing it as merely a temporary postponement of the problem.

 

However, the situation could worsen further—we might even face a diesel shortage. "There are fears—we are hearing signals—that perhaps we haven't yet seen the worst of the diesel crisis. And it is possible that there will actually be a shortage of diesel," he said, adding that if any consumption restrictions were to be introduced, they would likely not affect household consumers.

 

Speaking about household consumers and their current situation, the expert expressed surprise that no decisions are being made in Lithuania to lower excise duties.

 

"If we lose part of our market—if people fill up their tanks in Latvia or Poland rather than Lithuania—then the budget loses out on the fuel that isn't sold here. Stubbornly insisting on maintaining high prices and doing nothing. I don't know. It’s not just our neighbors [taking action]; Germany has also moved to cap fuel prices, as have some other countries," V. Jankauskas pointed out.

 

Nevertheless, fuel price caps are being discussed in Lithuania as well; President Gitanas Nausėda has proposed the idea. However, the proposal is clouded by a number of concerns—specifically, that it could backfire and actually drive prices up, or even lead to fuel shortages.

 

"Flexibility is key—the ability for gas stations to offer prices flexibly, lowering or raising them as needed," said V. Jankauskas. Lankas goes even further: the country’s president has already signed a law imposing a 60% tax on fuel company profits that exceed a threshold based on their standard margins. In other words, it taxes windfall profits. This measure is expected to boost the budget by more than €900 million—funds that could be used to lower fuel prices.

 

"If this is being implemented in Poland, and we have the same Polish company—Orlen—operating in Lithuania and currently making huge profits, then if it works in Poland, it could work here too. Of course, Orlen Lietuva won't be happy about it," the expert reasoned.

 

Ramūnas Dilba, the President’s chief advisor, also discussed the possibility of considering this measure on another *Žinių radijas* program.

 

"The Government could consider this measure as part of a broader package of measures. We would like to see the projected impact and calculations regarding how much revenue such a tax could generate if applied to Orlen," the advisor said.“

 

Americans are buying cheap diesel from the Russians. The US certainly won't suffer from a massive diesel shortage the way we will. Let’s take a serious look at who we vote for in elections in Lithuania.