Global Price Reductions Must Be Passed on to Icelandic Consumers

Lilja Alfreðsdóttir

The Minister of Culture and Business Affairs has encouraged Icelandic petrol companies to do their part in the effort to curb inflation. The minister calls for the reduction in the price of fuel on the global market to be passed on to Icelandic consumers, RÚV reports.

More competition needed

Lilja Alfreðsdóttir, the Minister of Culture and Business Affairs, maintains that it is urgent that the Icelandic petrol companies take part in the fight against inflation – and return price reductions on the global market to Icelandic consumers. According to the minister, the companies have not provided adequate explanations for price differences in Iceland and Denmark.

“The global inflation rate is falling because oil and energy prices are falling globally. And we demand similar price reductions in Iceland,” Lilja stated in an interview with RÚV. The minister pointed out, by gesturing towards data from the Competition Authority [and basic economic principles], that when the competition has increased, prices have fallen.

“Which tells us that vigorous competition is important. It must also be said that when you look at prices in Iceland and Denmark, the difference, in my opinion, is too great for the petrol companies to explain,” Lilja added. She encouraged petrol companies to participate in the fight against inflation.

“What I think is most important is that the price reduction that is taking place on the global market is passed on to Icelandic consumers. The ministry has been looking into this market, and the same hold for the Competition Authority, and we will, of course, continue to monitor this market. But I think it is very urgent that the petrol companies take this to heart,” Lilja concluded.

CEO of Skeljungur denies that prices have been kept high

In an interview yesterday, the Director of the Competition Authority (Sammkeppnisstofnun) argued that greater competition in Iceland would translate into lower petrol prices. The CEO of Skeljungur, Þórður Guðjónsson, denied the claim that the petrol companies have been keeping prices unreasonably high:

“Iceland is not a big country,” Þórður told RÚV, “and I think it’s certainly inaccurate to speak of a kind of multi-competition, which is the antonym of oligopoly. There are four companies that import petrol in Iceland. There are five companies that sell petrol at their gas stations. So I think there is a decent competition there.”

When asked if the companies were still keeping the prices abnormally high, Þórður responded in the negative: “No, I wouldn’t say so.”

As noted by RÚV, the companies that import petrol to Iceland are Skeljungur, N1, Olís, and Atlantsolía. Þórður stated that it was unfair to compare price trends of petrol in Iceland with global market prices for crude oil as there are no oil refineries in Iceland:

“No one imports crude oil into Iceland, for there are no oil refineries in Iceland. We need to import refined petroleum products. These petroleum products come from Norway – from Mongstad in Norway – where Equinor is the only supplier in Iceland; it has a pretty good hold on the country. There is no possibility for us, the petrol companies, to get oil from anywhere else. All of us have to buy separately, as competition does not allow joint purchases of fuel, which would strengthen our position in the importation of fuel.”

As to Lilja’s point about price differences between Iceland and Denmark, Guðjón gestured towards the fact that there are oil refineries in Denmark, which allows Denmark to purchase crude oil.

Diesel Supplies to Run Dry Soon

driving in reykjavík

Due to an ongoing strike among oil truck drivers, petrol supplies are quickly depleting at Reykjavík stations, and representatives of major stations anticipate that supplies of diesel fuel will soon run out, Vísir reports. The CEO of N1 told the outlet yesterday that the company’s stations will close “one after the other” in the coming days. He is particularly concerned about the situation that may arise after the weekend.

Wage negotiations remain at a standstill

There is still no progress in the wage dispute between the Efling union and the Confederation of Icelandic Enterprise (SA); after Ástráður Haraldsson, the new temporarily-appointed state mediator, failed to inspire progress last weekend, members of the Icelandic Confederation of Enterprise (SA) voted to approve a lockout of some 20,000 workers. The lockout is set to begin on March 2 at noon.

Meanwhile, strikes among oil truck drivers – alongside employees at the Berjaya and the Edition hotels (in addition to the original 700 striking hotel workers and other labourers) – resumed last Sunday at midnight. Since then, petrol supplies have gradually begun to deplete.

Representatives of major stations anticipate that supplies of diesel fuel will run dry soon. The CEO of N1 told Vísir yesterday that the company’s petrol stations would close one after the other in the coming days. He also expressed particular concern over the situation that may arise after the weekend.

“The petrol situation is better, but with regard to diesel stocks, I fear that the situation will become difficult around or after the weekend … I really don’t want to imagine the situation after the weekend, but it will be serious.”

Many N1 employees are members of the Efling union. Regarding the planned lockout of SA, Hinrik stated that N1 employees were “not at all ready to stop working.”

Companies facing a similar situation

As reported by Vísir, other oil companies face a similar situation. The CEO of Olís told the outlet yesterday that the situation was “difficult” and that, in some cases, both diesel and petrol supplies had run out, or were about to run out, at some of the company’s largest stations.

Drivers can view Ólís’ inventory status at its various stations online.

As supplies slowly run dry, some drivers have resorted to hoarding fuel. Last week, a truck driver posted a video on Tik-Tok in which he filled huge plastic tanks with diesel fuel. The first reports suggested that the man had pumped approximately four thousand litres, but it now seems that the quantity was even greater. Such a thing is both illegal and highly dangerous,

Þórður Guðjónsson, CEO of Skeljungur, told Fréttablaðið yesterday that it was a matter of “grave” concern when drivers carry more fuel on board their vehicles than the law allows. He also maintained that records were broken at petrol pumps last week.

Lockout to have a greater impact than strikes

Þórður also told RÚV that the effect of SA’s lockout would be much greater than that of the strike. “Contractors who drive for us belong to Efling, and as a result, they will not be able to distribute anymore … as soon as the lockout begins, pretty much everything will come to a standstill.”

RÚV also noted that SA’s lockout would also have a major impact on oil companies’ service stations and lubrication and tire services, which the Efling strikes have thus far not disrupted.

Participation in lockouts “not optional”

SA issued a statement yesterday, stressing that the participation of companies in the lockout was not optional. The Confederation also published a list of exempt parties from the lockout that will be imposed on Efling members. These include all those who work in health and geriatric services, as well as the police, the fire brigade, ambulances, and search-and-rescue teams, in addition to civil defence and educational institutions.

As noted by Vísir: “In the event of a lockout, no one who works according to the collective agreements between SA and Efling may come to work unless they receive an exemption from SA’s executive board. Salary payments are cancelled during the lockout, as in the case of strikes, as stated on SA’s website.”

Labour Talks: Yesterday’s Long Meeting Inconclusive, Mediator Reticent

Ástráður, Halldór Benjamín

At 9 AM yesterday morning, the negotiating committees of the Efling union and the Confederation of Icelandic Enterprise (SA) attended their first meetings with the new, temporarily-appointed state mediator, Ástráður Haraldsson.

Just before the meeting began, Ástráður told reporters that, so long as there was some good to be had, he was prepared to meet late into the evening. And meet he did; it was not until 10 PM that same day that the negotiating parties decided to call it a day. The disputing parties are set to meet again at 10 AM this morning.

Below you will find a brief recap, in broad strokes, of yesterday’s events.

The meeting commences

Prior to stepping into the meeting with SA and the temporarily-appointed state mediator, Sólveig Anna Jónsdóttir, Chair of the Efling union, told RÚV that she was happy with the new mediator: “We are very happy to have gotten him involved in this dispute for we feel he is willing to listen to our point of view.”

Halldór Benjamín Þorbergsson, Director General of SA, was not quite as upbeat during an intermission at noon. Speaking to RÚV, Halldór stated that it was “too early to tell how the negotiations between SA and Efling were progressing.” He clarified that the mediator had been meeting separately with the two disputing parties, hoping to find some middle ground.

Asked if he was hopeful, Halldór Benjamín replied with a simple “no.” “I realise our responsibility to society and the enormous financial damage that will be done to the economy in the coming days.”

At the time, Halldór Benjamín expected the meeting to last into the afternoon.

Solidarity meeting at Harpa

While Halldór Benjamín spoke to the media at noon, a large group of people had gathered at the Northern Lights Hall (Norðurljósarsalur) at the Harpa Music and Conference Hall. Efling was hosting a solidarity meeting; a strike, involving, on the one hand, 500 employees of the hotel chains Berjaya and Edition, and, on the other hand, about 70 employees at Samskip, Skeljungur, and Olíudreifing, had officially come into effect at noon. Efling members were there to confirm their participation in the strike and register for payments from the strike fund, which amounts to ISK 25,000 ($173 / €162) per day.

Gas stations busy

At 2.30 PM, Vísir reported that the oil company N1 had closed the delivery of petrol and diesel at several stations in the Southwest corner of Iceland. The outlet reported that gas stations in the capital area were expected to run dry over the coming 24 hours; earlier that day and yesterday, some customers had arrived to stations with large containers to stock up on petrol. The fire brigade later issued a warning, advising against the hoarding of petrol.

Halldór leaves the meeting – on account of the flu

At 5 PM, Halldór Benjamín walked out of his meeting with Efling and the state mediator. But not because talks had stranded. He was feeling under the weather. He told a reporter from RÚV he felt “a pain in his neck, was a bit restless, and was advised to go home.”

The reported, Arnar Björnsson, inquired if his indisposedness derived from being made to swallow any nauseating suggestions. Halldór laughed.

The issue at hand

As noted by RÚV, the gap separating the two disputing parties is not, on the face of it, wide. SA had refused to waver from their offer of a collective agreement similar to the one signed by other unions of the Federation of General and Special Workers in Iceland (SGS). The agreement included a general rate increase of ISK 32-52,000 ($222-381 / €207-356) per month. SA had repeatedly stated that it was “out of the question” to offer Efling a different and better contract than other unions.

Before the last real negotiation meeting on January 10, Efling submitted an offer of rate increases in the range of ISK 40-59,000 ($277-409 / €259-382) per month. Additionalliy, the union demanded an ISK 15,000 ($104 / €97) increase in the so-called cost-of-living compensation.

Sólveig Anna stated that the offer still stood and, prior to the meeting yesterday morning, noted that the gap between the parties was not that wide. “It’s not that far apart in terms of money. It’s about [SA’s] pride and whether they are going to let it work for the interests of Efling’s 20,000 members,” she told RÚV.

Proper talks could begin

At 5 PM, Ástráður Haraldsson told reporters that, in his opinion, there was a possibility of engaging in “real collective bargaining negotiations” in the dispute between Efling and SA. He had spent the entire day with the negotiation committees of SA and Efling, meeting each of them separately, although he did not consider “proper talks” having actually begun.

“We’ve been trying to discover the nature of such talks and whether it would be possible to engage in such talks,” Ástráður told RÚV.

Talks renewed at 8 PM

At 6 PM – during a break in the meeting – Eyjólfur Árni Rafnsson, Chair of SA, stepped in for his indisposed colleague and offered an interview to reporters. He told the media that he considered it “overly optimistic” to expect that collective agreements would be signed on that day. Nevertheless, he admitted, it was a “positive sign” whenever people sat down to talk.

At that point, the meeting, which had been going on intermittently since 9 AM, was the longest in the wage dispute to date. Eyjólfur observed that that was “a good thing.”

The meeting resumed at 8 PM, with Ástráður Haraldsson hinting to reporters that the meeting “might run long.” When the meeting began again, Eyjólfur Árni stated: “We’re going to find out if we can see eye to eye and whether we can enter into real negotiations to put this to and end.” Eyjólfur Árni was unwilling to say what exactly SA had proposed, other than that those things that were being discussed with the union were things that SA “would have liked to have discussed in January.”

Meetings finally come to a close

After a long day of meetings, the final sessions finally concluded between 10-11 PM yesterday. Another meeting has been called at 10 AM today.

“We are still in this opening phase and have not managed to enter into actual wage negotiations,” Ástráður Haraldsson told RÚV following the meeting.

As noted by RÚV, although the Efling strikes had only lasted twelve hours, people had already begun stocking up on medicine. The Director of Lyfja, a retail pharmacy, told RÚV yesterday that there was no need for people to stock up on medicines. “There is several months’ supply of medicines in the country, at any given time. Medicines are also, in some cases, life-saving products, and we have received exemptions to carry out this extremely important role of health services, i.e. the distribution of medicines,” Sigríður Margrét Oddsdóttir told RÚV.

Iceland’s Low-Cost Electricity in High Demand as Energy Prices Skyrocket in Europe

Low cost of electricity in Iceland compared with the rest of Europe

There is an increasing demand amongst foreign companies to base their operations in Iceland due to favourable energy prices, but the demand far exceeds what the country’s power plants can produce. RÚV reports that Landsvirkjun, the National Power Company of Iceland, says there’s a pressing need for increased electricity production.

‘New, potential customers are knocking on the door’

With Russia cutting off petrol pipelines to Europe, energy prices on the continent are skyrocketing. Meanwhile in Iceland, energy prices have remained almost unchanged. “It’s our renewable energy that makes this possible,” says Tinna Traustadóttir, Executive Vice President of Sales at Landsvirkjun. And as gas prices continue to rise, it’s not only consumers, but also companies, that are suffering. This has led to many enterprises—not least energy-guzzling aluminium smelters—going under as a result.

The state of Europe’s changing energy landscape is “reflected in high demand from existing customers,” explains Tinna, “and we also feel that there are new, potential customers knocking on the door.” At present, however, Iceland has no electricity to spare.

“As it stands now, you could say our electricity system is at full capacity, or as close to that as possible. And of course, it takes time to generate a new supply, but the situation is a pressing one,” says Tinna.

‘We will need to prioritize…but it’s clear we need to accelerate’

As a result, many foreign companies are clamouring to relocate their operations in Iceland, but the demand not only far exceeds the country’s current energy supply, it also exceeds Landsvirkjun’s plans for future  electricity production.

“We will need to prioritize,” says Tinna, listing off Landsvirkjun’s competing energy interests. “Domestic energy exchange, domestic food production, technological progress, supporting our current customers. But it’s clear we need to accelerate.”

Reykjavík to Reduce Gas Stations by Half by 2025

Reykjavík is set to dramatically reduce the number of gas stations in the city by 2030, Vísir reports. Currently, there are 75 gas stations in the capital area, but Reykjavík City Council has approved plans to reduce these to around 37 in the next six years as part of its environmental initiatives.

Mayor Dagur B. Eggertson announced the plan on his Facebook page this week, saying that the gas stations will be replaced with apartment buildings, shops, and other services. Originally, the city had intended to meet this goal by 2030, but Dagur noted that the City Council liked the initiative so much that everyone agreed to comply with a tighter deadline.

Reykjavík’s climate plan foresees gas stations largely disappearing from the city by 2040 and that vehicular traffic and public transportation will also be greenhouse emission-free by the same time. Current projections are that private cars will account for 58% of transportation by 2030, while public transportation will account for 12% and cycling 30%.

Petrol Prices Dropping

The reference price of petrol in Iceland has fallen for three months in a row, Kjarninn reports. The current reference price for petrol is ISK 215.5 ($1.80/€1.58) per litre, which is the lowest it’s been since it hit a three-year high in October 2018. At that time, the reference price for petrol was ISK 224.3 ($1.87/€1.64) per litre. The last time petrol prices had been that high in Iceland was June 2015.

Although the price of petrol has been falling, the mid-January figure is still 8.4% higher than it was in the middle of January 2017, when petrol cost an average of ISK 198.8 ($1.66/€1.46) per litre. For reference, the króna to US dollar exchange rate dropped by 10.2% in 2018, and the cost of crude oil on the global market has dropped by just under 12% since the middle of January 2018. The exchange rate is an important factor on the sale price of petrol in Iceland, as the purchase price of imported petrol is calculated in US dollars.

The Icelandic state takes a portion of the profits from each litre of petrol sold. Thus, in 2018, 20.46% of the cost of petrol went toward a special petrol tax, 12.69% went to general petrol tax, and 3.83% went to a carbon tax. Lastly, 19.35% of the sale price is VAT.

All combined, 121.39 krónur from every litre of gas sold went to the Icelandic government in 2018, or 56.33%. The highest that the government’s take has reached is 60.26% in July 2017.