Latvia is considering releasing up to 40,000 tons of oil reserves onto the market, Economic Minister Viktors Valainis announced Thursday.
The potential release comes after the International Energy Agency (IEA) indicated a need to draw down oil reserves, prompting Latvia to assess available fuel supplies. According to Valainis, a survey has been sent to market participants to determine the amount of fuel physically stored in Latvia, the holdings of traders, and the current state of the fuel market, including pricing policies. A decision on how to utilize Latvia’s reserves will be made after the information is collected.
Currently, the physical availability of fuel reserves in Latvia is stable, and We find no significant supply risks, Valainis noted. However, he cautioned that global market developments are difficult to predict, necessitating a cautious approach and evaluation of various potential scenarios.
When deciding whether to release reserves, Valainis emphasized the importance of maximizing the impact on market conditions and fuel prices while still maintaining the reserves’ primary purpose: ensuring resource availability in the event of a real fuel shortage in Latvia.
He explained that IEA member states collectively decide on reserve releases in response to potential fuel shortages in the global market. Each country then determines the amount to release based on its reserve size, signaling that despite a 20% disruption in the fuel market caused by ongoing conflict, that disruption will be offset.
Valainis added that coordination with Poland, a major fuel wholesaler in Latvia, would be beneficial for the Baltic states. He believes this approach could have a greater positive impact on the regional market.
“If these reserves are released onto the market, it will be a short-term result. It cannot have a long-term impact,” Valainis said. “From Latvia’s side, we are talking about 40,000 tons – that’s 10 to 14 days.” He clarified that this would be Latvia’s contribution to a collective effort to stabilize the global market.
At the same time, Valainis stressed the need for Latvia to approach the use of reserves cautiously. He noted that the oil market has been highly volatile in recent weeks, making it important for the country to maintain a substantial amount of physical reserves.
The minister also expressed his personal opinion that reserves purchased and owned by the state in Latvia should not be released, as the situation remains difficult to forecast. Latvia is considering using so-called option agreements, or “tickets,” instead.
Regarding the potential impact on consumers, Valainis said it is currently difficult to predict. If the reserves were sold at market prices, the impact on fuel prices could be minimal, but a greater impact would occur if the state implemented additional support mechanisms. He suggested that reducing excise duty on fuel would be one of the most effective solutions.
Valainis mentioned that, considering the differing views between the Ministry of Economics and fuel traders, Latvia plans to propose the introduction of a temporary excess profit tax to ensure that no unjustified profits are made during price fluctuations. This would allow for monitoring of the market situation, and any excess profits would be channeled back to the public through fiscal instruments.
“If market participants compete fairly and do not profit from the situation, there will be no excess profit. Otherwise, it will be clearly visible in companies’ financial statements,” the minister emphasized.
When asked about a reduction in excise duty on fuel, Valainis said the government will decide based on fuel price developments and the impact of the conflict. If the impact is short-term, there will be no need to reduce excise duty, but if forecasts indicate that the conflict will be prolonged, portable solutions will be considered.
Valainis also stated that he was not fully convinced by fuel traders’ explanations of every price increase at the pump.
He stressed that the fuel market is a priority for all responsible institutions.
Gatis Titovs, fuel category manager at SIA “Circle K Latvia,” told journalists that less attention should be paid to crude oil quotations on exchanges and more to fuel quotations on the exchange. Circle K Latvia
He explained that the price of Brent crude oil has risen from approximately $68 to $98 per barrel in the past month. Meanwhile, diesel fuel quotations on the exchange have increased from around $700 to $1200. Translating this increase into euros and liters would mean an increase of approximately 46 cents per liter for consumers.
Titovs noted that the increase in retail prices so far has been around 36 cents per liter, which, he said, corresponds to the market situation. He added that fuel traders also use reserves and partially cover the increase in costs from profits, so there is currently no basis for talking about excess profits.
He also emphasized that there are currently no problems with fuel supplies. The situation has been discussed with both suppliers and within the industry association, and the major suppliers in Latvia have confirmed that there are no problems with oil supplies, processing, or logistics. A fuel shortage is not expected in the near future, and the main issue is price.
Titovs noted that industry representatives explained the formation of fuel prices during a meeting, but the economics minister was not fully convinced. He suggested that questions may have arisen due to price dynamics, as a drop in oil prices on March 9 was not immediately reflected in fuel prices for consumers.
He explained that on that particular day, the fuel quotation on the exchange did not actually decrease – it increased by one cent. The drop occurred the next day, and prices rose again after that. Titovs stressed that one-day price fluctuations are usually not reflected in retail prices, as traders mostly perform with long-term contracts where the price is determined over a medium period – a month, a week, or three days.
Ieva Šmite, chairwoman of the Competition Council (KP), commented that the agency draws conclusions only after conducting specific investigations and obtaining comprehensive information. Thursday’s meeting at the KP was informative. Competition Council
Šmite noted that the situation is relevant to everyone, including the KP, and refrained from providing further comment.
The average price of diesel fuel at Latvia’s largest gas station networks has increased by approximately 25% since the escalation of the conflict in the Middle East on February 28 of this year, while the price of 95-octane gasoline has increased by 7-9%.
