The continuous rise in the price of oil on the international market will inevitably mean that the price of oil products, including fuel, will have to go up in Malta and elsewhere, a spokesman for the Investments, Industry and IT Ministry told The Malta Independent.

The price of crude oil rose to a record high of $61 per barrel earlier this week. The cost of oil products will, therefore, need to be adjusted, leading to increased costs for industry which could also translate in an increase in the price of their products.

Asked about the effect of the increase in the price of oil on products derived from it, the spokesman said that the ministry is seriously concerned with the developments in the oil industry and is closely monitoring the situation. “The evidence is in the globally known fact that oil is more expensive this year than it was last year and indeed on certain days it is more expensive than it has ever been. The impact of this globally known fact on the price of fuel (which is completely manufactured from processed oil) in Malta as anywhere in the world is predictable.”

The increasing cost of oil could also result in an eventual rise in electricity and water tariffs. In the budget for 2005, the government announced a 17 per cent surcharge on electricity and water, based on calculations made in 2004. The cost of oil has, since then, risen.

But the sources were more cautious on this issue, saying that “any movement in the surcharge will be announced if and when the Cabinet decides to make such a move.”

Will Enemalta’s reported losses accumulate further because of such increases on the international market?

“Yes,” the spokesman said. “The fuel surcharge mechanism relies on the government’s decision to make Enemalta cover 52 per cent of the gap between international fuel prices in the present and prices in 1999.”

Any increase in the price of oil would therefore lead to more costs for Enemalta Corporation, the spokesman added.

Asked on the impact of oil prices on the local industry, the spokesman said that “in terms of competitiveness, oil prices are likely to have a neutral effect since industries that compete with our own will be facing the same impacts. Though this is a neutral outcome, all industries – local and not – will be experiencing increases in the cost of production that they certainly would prefer to avoid, not to have to face their consumers with increased prices or alternatively absorb the increased costs through cutting their own margins”.