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Saturday, October 1, 2022

Pump prices prompt tax cut proposals

Some top politicians, stunned by record-high pump prices for both gasoline and diesel, are calling for the removal of most or all of Norway’s high fuel taxes. They argue that otherwise, the state will get even richer while “ordinary folks” will suffer.

Diesel at this station in Bærum, just outside Oslo, cost the equivalent of USD 11.15 a gallon on Monday. PHOTO: NewsInEnglish.no/Morten Møst

“Now the pump prices have to come down, before they ruin both individuals’ and companies’ economy,” Progress Party leader Sylvi Listhaug demanded while speaking to her own party faithful at a meeting of their national board over the weekend. Progress, often viewed as populist by its opponents in Parliament, has long called for tax cuts and especially those on fuel.

Listhaug accused Finance Minister Trygve Slagsvold Vedum of the Center Party as simply continuing “to grin while he refuses to do anything to stop folks getting fleeced at the pump.” Ove Trellevik, energy policy spokesperson for the Conservative Party, told Norwegian Broadcasting (NRK) that the party expects the government to follow developments closely and ensure Norwegians’ purchasing power and business’ competitiveness.

Vedum himself had campaigned last year on lower fuel taxes for those who live in rural areas and have to rely on their cars. He admitted late last week that pump prices (approaching the equivalent of USD 12 a gallon) have become “sickeningly expensive,” telling Radio P4 that “we’ve never seen such an extreme increase before.” His Center Party colleague, Marit Arnstad, had said at this time last year that she’d never be part of government that allowed petrol prices to exceed NOK 20 a liter.

Now they’re running well over that in the Oslo area and jumped to as high as NOK 27 (USD 3) per liter in Tromsø in Northern Norway. It can easily cost well over USD 100 to fill the tank now.

Some analysts and economists also warn that fuel prices in Norway can soar to as much as NOK 40 per liter this summer. Both Rystad Energy and Norway’s truck drivers’ federation think that’s entirely possible, while Professor Øystein Foros of the Norwegian business school NHH expects pump prices over NOK 30. The ongoing energy crisis has been made much worse after Russia invaded Ukraine and Europe cut off its gas and oil supplies from Russia in retaliation, and now diesel is even more expensive than gasoline. Oil continues to trade at well over USD 100 a barrel, sending refined products up as well.

Norway’s already punitive fuel taxes, aimed at reducing car use, make up an estimated NOK 8 of the current pump price for petrol and NOK 7 of the current diesel price. Listhaug found support for her proposal to simply remove all the taxes (which bring pump prices down to where they were late last year) from Norway’s automobile association NAF. Its spokesperson, Camilla Ryste, is a former top aide to Vedum’s government partner Jonas Gahr Støre of the Labour Party, now prime minister.

Prime Minister Jonas Gahr Støre (left) and Finance Minister Trygve Slagsvold Vedum were under lots of pressure as they headed on Monday into their government’s first meetings to form next year’s state budget. PHOTO: Statsministerens kontor/Anne Kristin Hjukse

The fuel taxes, Ryste said, “are factors that the government steers. With a diesel price of NOK 25 per liter, around 40 percent will just be taxes (meant to cover the cost of road use, carbon taxes and VAT). The government can do something about them.”

It remains unclear whether it will. Støre gathered all his ministers at a hotel outside Oslo for the government’s first major budget conference on Monday, and headed into the meetings with a vow to reign in government spending. They don’t want to heat up an economy into which lots of gas and oil revenue is also pouring, money that some equate to war profits.

“When we spend public funds, we must do it in a manner that generates economic activity, not just higher prices,” Vedum said as he and Støre faced reporters outside the hotel in Hønefoss. Even the Socialist Left Party (SV), on which the government relies for a majority in Parliament, wants to pare taxes because of the recent record-high electricity rates, rising prices at the grocery store and now fuel. The war in Ukraine is also likely keep generating more uncertainty and higher prices.

“What’s happening in Europe will have an effect on what happens here,” Støre said. “That will be a major theme for us when we put together the state budget.”

The fuel prices, though, are particularly uncomfortable for Vedum and his Center Party. “They’re way too high,” he had to admit. “We’ve had a week we never thought would be possible.” He stopped short, however of offering any specific relief.

newsinenglish.no/Nina Berglund

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