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Energy resources get more expensive — a global phenomenon
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Lately I witnessed several waves of fuel price increases. First, the immediate impact of higher prices will obviously be on the pockets of drivers. Secondly, the potential increases could be followed in the coming months by the effects that will be felt in all the activities where the cost of transportation has large shares in total costs, as well as in those that use petroleum products as raw materials, for example. It may happen that private transporters of persons would stick tough to the tariffs for travellers. However, I assume that price increase will be higher for the transportation of goods. It is not excluded that several products, including food, will get more expensive, though there may be some speculations made in this regard. On the other hand, such a decision will probably be taken by producers and traders only in the coming months, if he were to follow the logic of impact of price increase for the production costs.
Many farmers complain that due to constant increase of prices for oil the land remains a fallow ground. It is of course a big problem, on one hand. On the other hand, the lands left unprocessed were as many as before the recent price growth. But let’s suppose that their number will be even bigger. Perhaps the farmers will suffer directly because of higher prices of petrol and diesel. Perhaps the transportation of goods will suffer directly because of higher prices for oil .The recent “adjustments” of fuel prices, operated by gas stations, made the diesel more expensive, which leads for transporters to higher costs. Diesel prices increased by about 15% in the last half of the year, which means a cost increase of about 6–8% if we take into account an average share of 20–22% in total expenses. Some additional costs will be assimilated by operators, but some will be also supported by beneficiaries. There are also efficient carriers for which diesel is only 12–15% of the costs. In their case, higher prices could reach just 2–3% of current tariff. Of course, there are also inefficient carriers, for which diesel represents over 30% of operating costs.
Accordingly, it would be logical if we will witness some price increases for food sooner or later. Just as a visible price increase might be noticed in a month or two, if we were to follow the same economic reasoning, i.e. after completing the production cycle, which now assimilates the new fuel prices. On the other hand, it is possible that manufacturers will bear those costs, due to a possible decline in sales, determined by higher prices for products, when processors would increase the price by about 5–7% of the final production. As a general rule, the food could also “catch” the more expensive plastic packaging, for example. Things could also evolve because the price growth creates economic and psychological preconditions that are necessary for increasing the prices of first need products (particularly food).
Another problem is the increasing prices for electricity. Actually, ANRE has approved new tariffs for domestic consumers. These increases appear to be reasonable if the major suppliers have increased delivery prices by over 10%. As far as we know, Moldova imports over 50% of the electricity, mostly from Ukraine, which even already announced increases in tariffs for electricity supplied to Moldova. So far, higher electricity price won’t have serious impact on population, because it more or less correlates with the purchase price, which is not exaggerated.
At the same time, the government should come up with solutions for categories of persons in need, but not through compensations, as it is done now, because this aid only postpone the problem from an increase of tariffs to another and does not solve it. Perhaps the differentiation on categories of people (as well as on the voltage levels if to proceed as in some European countries) would be one of the solutions in this regard. However, it would be better if the authorities would find measures to increase people’s purchasing capacity; it is actually about the budgetary employees in particular, rising the incomes, the wages. Here we think a series of reforms hover that are tied together, reform of wages, pension, etc. It is particularly this issue that should be thought very seriously, because trends are known: fuel, electricity will not be cheape5, and fairly large gap in purchasing power among certain categories of persons in Moldova is quite high.
Rising costs of energy resources is a global phenomenon. In addition, for the state budget a higher price for fuel is not necessarily bad news, which in turn would bring higher incomes from excise duties, and therefore higher incomes in the state treasury. Moreover, higher excise taxes on petroleum products contributed to the nominal increase of revenues from excise duties, at least so far. And it is unlikely that the government will touch the excise, i.e. to lower them, as rumours lately say. A solution in this regard for example would be to reduce excise duty for farmers and agricultural producers for certain periods of the year, for spring or autumn works, sowing, ploughing, when in fact massive amounts of fuel are used.