Baltic States Choose Three Different Responses to Rising Fuel Prices

Expensive fuel has hit all three Baltic states this year: Latvia, Lithuania and Estonia. To curb price growth, ease the burden on residents' wallets and avoid faster inflation (a general rise in prices across the economy), each government has chosen a different short-term solution. The business section of the news portal Delfi, "Delfi Bizness", reports on this. It also looks at the current effect of the excise tax cut and at what fuel could cost if that cut were withdrawn.

Support in place until year-end

Lithuania and Latvia currently have different support mechanisms for residents. They were introduced relatively recently and are for now planned to apply until the end of 2026. In Estonia, there have been no significant changes since spring.

In all three countries the state budget is a sensitive issue, so heated debates are expected on whether and how to compensate for higher fuel prices in future while keeping inflation in check. Ways of increasing state budget revenue may also be considered.

An economist's explanation

Kārlis Purgailis, chief economist at Citadele bank, notes that the fuel price depends on several factors: the situation on the global energy market, wholesale prices and taxes. He explains that excise tax is a fixed amount per litre, so reducing it can help lower fuel costs. At the same time, world market price changes usually reach filling stations with a delay of several weeks, and prices tend to fall more slowly than they rise.