«The rise of natural gas tariffs is natural because gas prices on the European market are very high. Currently prices fluctuate around 100 EUR/MWh, whereas historically the price has been around 20 EUR/MWh,» said Luminor Bank economist Pēteris Strautiņš in an interview to BNN.
According to her, tariffs for households follow with a big delay, but now they reflect the new reality.
«It is natural for the gas price rise to negatively impact Latvian residents’ purchasing power. This influence varies – everyone is affected by this differently – through prices of other goods and services. Nevertheless, most of society is affected directly. Many buy gas to heat their home, but there are even more people who live in houses that receive heating produced from gas. If gas is the only resource used to produce heat, the heating price will be around 200 EUR/MWh, unless the state does not take on a portion of the costs,» explained the economist.
«It’s clear the state will assist. Already the government is engaged in talks regarding a EUR 350 million aid package. I think it won’t be the last. This is why it is not possible to tell at the moment how influence from gas price increase will be divided between private wallets and the state budget,» added Strautiņš.
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«Without a doubt – the markup for gas imports will be very high for Latvia. It will exceed one billion euros. If we assume gas consumption does not change, the additional import bill will be around EUR 1.5 billion. However, consumption will definitely go down – cities are transitioning to wood chip heating, households are buying pellet furnaces, many say they will make do with lower air temperatures in their homes,» stresses the economist.
However, he also says «fortunately the gas price rise is not the only thing happening in Latvia’s economy. It is developing very well.
In Q1 growth in actual numbers was 6.7%, in monetary form it was 18%. During the pandemic GDP fluctuated within EUR 30 billion. Next year it will exceed EUR 40 billion. Exports of goods increased by 30% in Q1. Exports of services increased by 40% in the same time frame. The total export amount will be around EUR 25 billion this year. This is why the gas price rise will not create overwhelming difficulties. We can afford it, we only need a political agreement as to who will divide this burden.»
As it is known, Latvijas Gāze JSC gas tariffs for households have increased between 65.6% and 89.9% in July 2022, depending on consumption.
For households that consume under 250 m3 of has annually, the differentiated end tariff with VAT and excise tax for the second half-year increased by 65.6% – from 1.10209 EUR/m3 to 1.8252 EUR/m3, whereas for households that consume 250 to 500 m3 a year, the end tariff increased by 74.7% – from 0.96649 EUR/m3 to 1.6896 EUR/m3.
At the same time, for households that consume 500 to 25 000 m3 of gas a year, the end tariff increased 89.9% – from 0.80405 EUR/m3 to 1.52715 EUR/m3.
In the next heating season Latvian state may compensate residents half of heating, electricity and gas tariff rise, as provided by the report prepared by Ministry of Welfare.