Fuel prices rise by up to 50 krónur per litre

Petrol prices in Iceland have risen by as much as 50 krónur per litre in the past month, driven by higher global fossil-fuel prices, the return of the previous value-added tax rate on 1 September and increased per-litre markups by oil companies, mbl.is reports.

Runólfur Ólafsson, managing director of FÍB, told Morgunblaðið that the reasons given for cutting VAT on fossil fuels on 1 May were to cushion the impact of rising global oil prices and curb domestic inflation. He said those arguments were even stronger now, with prices higher than they were in May.

The VAT increase added an average of about 25 krónur per litre, Ólafsson said. Prices have since climbed by a further 23 to 24 krónur in many cases, leaving motorists paying about 50 krónur more per litre than on 31 August.

A proposed 15 to 16 per cent increase in the mileage charge at the start of next year would add to costs for households and businesses, he said. While the government cannot control global prices, it decides tax rates. “You should not add to the burden and raise taxes at the same time. It is pouring oil on the fire,” Ólafsson said. He also questioned why the mileage charge would rise well above inflation.

Higher fuel costs are also affecting businesses. Ólafur Einarsson, managing director of Þjótandi, one of Iceland’s larger earthworks companies, said the impact on its operations was severe. Fuel costs add millions of krónur to the company’s monthly expenses, and increases on large contracts that are not adjusted for price changes would be reflected in its next bids, he said.