Negative reactions were predictably forthcoming from unions, consumers and the Opposition yesterday after yet another gas price increase was announced on Thursday.

The price changes announced on Thursday mean that gas prices will be upped by 155 per cent in just over a year, said Labour speaker for Utilities Marlene Pullicino.

The increase mostly affects restaurateurs who use gas cylinders. Hoteliers often use liquid gas so they would not be affected as such.

“Restaurateurs are more sensitive to this increase because of previous increases in the utility rates and the Cost of Living Adjustment, among others,” said George Micallef, president of the Malta Hotels and Restaurants Association.

The sector was already facing stiff competition, and while the impact was not yet measured, the market is “very price conscious”, he said. This increase may not necessarily be reflected in restaurant prices because competition is very high, he pointed out, and probably restaurateurs will have to absorb it. Changing patterns were already being observed in spending trends in hotels and restaurants so adjusting prices to reflect the new gas prices may not be a good idea.

The higher utility rates this year have already raised bills by some 16 per cent for restaurants, so this is another government induced cost which will add to existent burdens. Meanwhile, operating costs, fuel prices and registration fees, were also revised upwards since the beginning of the year. The new rights for part-time employees will also come in as from September.

Gejtu Vella, on behalf of Union Haddiema Maghqudin said that every increase affects the purchasing power of families. However he positively noted the government’s initiative to introduce a subsidy for 28,000 families.

“The market has been liberalised; therefore consumers are now facing the real price of gas as it is no longer being subsidised.” He added that it is still early to say whether and how employment will be affected but consumers may be facing a second round of increase in the near future if confectioneries, for instance, increase the prices of their products.

The General Workers’ Union said in a statement it was “seriously concerned” by this increase in the cost of living. Some 60,000 people are at risk of poverty, according to a recent Eurobarometer survey and the increase in benefits the government announced was not to cover them all.

GWU was therefore disappointed with the way the government and authorities were imposing more burdens. Workers were being asked to make greater sacrifices to meet exigencies at the workplace and now they have to face increasing costs. Increases in gas and fuel prices will also add weight on the vulnerable economic sectors, it said.

When contacted, Pierre Fava, president of the Malta Employers’ Association said the increase was definitely negative mainly for the catering sector and the industry in general especially in these times of economic slowdown. Yet it was too early for feedback, he said, and the full impact can only be seen after the tourism season closes or at the end of the industrial year.

The increase in energy benefits is not enough, Marlene Pullicino said. The government will be paying a maximum compensation of €745,000 to a number of families yet the hike means a €4million increase for families, according to the study carried out by the Malta Resources Authority.

In the case of businesses, PL said quoting the same study, that expenses will increase by 30 per cent and there will be no compensation to restaurants and hotels which are facing this hike during the peak season when agreements with tour operators have been concluded.

In a statement issued on Thursday, the Malta Resources Authority (MRA) said the revision reflected international propane and butane prices. During the verification process, MRA did not accept the formula proposed by Liquigas Malta Ltd and revised the proposed prices downwards.

A study carried out by the same authority showed the revision will mean a €28 difference over average consumption. It also pointed out that gas retail prices were revised twice since April 2009. Before then, a 12 kilogramme cylinder was sold at €5.40. The retail price rose to €7.40 on 1 April 2009 and to €10.50 on 3 August 2009. It now went up to €13.90.

The study concluded that it is likely for any price increase of LPG will have to be close to fully absorbed by the household disposable income, as there seems to be no substitution possibilities, at least in the immediate and short period. Calculations show that the household disposable income will fall by around €1.85 per person or €5.29 per household annually.

It added that demand for LPG in the commercial/industrial sector is more sensitive to changes in economic activity with the respective GDP elasticity of demand equalling to 1.19. This means that a one per cent increase in GDP brings about a 1.19 per cent increase in the commercial demand of LPG.

Demand for LPG of the commercial/industrial sector is not price elastic. An increase in the price of 1 per cent will lead to only 0.204 per cent fall in demand for LPG implying that any price rises will have to be absorbed “almost completely” by the commercial enterprises.

Given that the total demand for LPG by the commercial/industrial sector in 2009 was 8,503,762kg, it is estimated that a 10 per cent price increase will cost the industry some €0.677 million.