Europe is currently facing a record-breaking increase in energy prices and to avoid this financially detrimental surge, the Maltese government will be rolling out €2.5 million a month to reduce tax on fuel and thus keep prices stable.
Petrol and diesel prices have risen by some 20% to 30% in the EU, but have remained stable in Malta, according to Finance Minister Clyde Caruana.
Caruana explained that the government has reduced the duty tax to the lowest threshold permitted by the EU as a way to dodge inflation.
This crisis threatens several aspects of the EU, from the post-pandemic economic recovery, to the budding green transition, to household incomes – and the problem seems to be getting worse.
In fact, according to EuroNews, analysts are warning that the crisis will be prolonged with the worst yet to come.
In general, prices of natural gas are reaching an all-time high.
Europe’s leading benchmark, the Dutch Title Transfer Facility, prices have risen from €16 megawatt per hour in early January to €88 by late October, an increase of more than 450% in less than one year.
Subsequently, electricity prices are skyrocketing and as autumn develops into winter and the temperatures gradually increase, this problem will affect the livelihoods of millions.
Despite renewables becoming the bloc’s main source of electricity for the first time in 2020, the EU relies on natural gas and coal for more than 35% of its supply of total production, with gas representing over a fifth.
However, the energy mix varies across the bloc.
For instance, fossil fuels have a marginal share in Sweden, France and Luxembourg but they take up more than 60% of total production in Malta, Cyprus and Poland.
Let’s get a bit of a background on this issue:
At the start of the pandemic, restrictions halted many activities across the global economy which caused a collapse of energy consumption, thus leading energy companies to cut investments, according to the IMFBlog.
Yet, consumption of natural gas quickly rebounded as it was driven by industrial production, which accounts for around 20% of final natural gas consumption – “boosting demand when supplies were relatively low,” the blog said.
“Energy supply, in fact, has reacted slowly to price signals due to labor shortages, maintenance backlogs, longer lead times for new projects, and lacklustre interest from investors in fossil fuel energy companies.”
For instance, Russia, Europe’s biggest supplier has slowed down its shipments to the continent and natural gas production in the US remains below pre-crisis levels.
Weather is another contributing factor that has exacerbated gas market imbalances. With severe summer heat and a bitter winter cold, cooling and heating demands have hiked.
Therefore, Malta’s government is trying to avoid this crisis from hitting the island as much as possible, investing millions of public funds to lower tax so that the inflation does not affect citizens even at the cost of less government revenue.
This article is part of a content series called Ewropej. This is a multi-newsroom initiative part-funded by the European Parliament to bring the work of the EP closer to the citizens of Malta and keep them informed about matters that affect their daily lives. This article reflects only the author’s view. The European Parliament is not responsible for any use that may be made of the information it contains.
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