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Global fuel crisis hits transporters

Despite strong crown, local companies are losing out

By Claire Compton
Staff Writer, The Prague Post
July 16th, 2008 issue

JAN PŘEROVSKÝ/THE PRAGUE POST
Tour and other bus operators have had to reach deeper into their wallets as diesel fuel prices jumped more than 5 percent last month.
After hitting record highs in June, the stagnation and slight decline of local fuel prices were small consolations for transportation companies.
While the crown’s impressive push steadied the cost of fuel this month, the long-term outlook remains grim, prompting transportation companies to move ahead with tariff hikes to offset the rising costs.
Globally, the crisis is worsening as oil prices in Europe set a record of $145.98 (2,181 Kč/93 euros) per barrel July 11. That same day, Czech prices dropped in defiance of nearly every other market, with Natural 95 dropping 5 hellers to 32.77 Kč ($2.19) a liter and diesel down 7 hellers to 35.14 Kč/liter since the previous week, according to the Czech Statistical Office (ČSÚ).
The prices owe their improbable buoyancy to the crown, which hit a series of its own records this month, notably on July 7 when it crossed the 23.50 Kč/euro threshold before hitting a high of 23.47 Kč/euro. On July 11, the crown set another record against the U.S. dollar at 14.74 Kč, a position analysts believe will continue.
Companies are responding in kind, with several announcing fare hikes in accordance with oil prices. National rail operator České dráhy (ČD), whose passenger division is already plagued by losses, announced at the end of June a 10 percent hike on its timetables, citing electricity and oil costs. The division previously raised its prices last December.
“We have been planning on changing our tariffs for a while,” said ČD spokeswoman Markéta Krausová. “Fuel is one of the most important considerations for any railway. We buy our fuel for 1.5 billion Kč annually, so even a small percentage increase in price will increase our costs by millions.”
The nature of public transportation means that costs are subsidized by the government, she added, so the higher tariffs set in January won’t recoup the loss.
“[Fuel] costs have increased, but we will not get money from the [higher tariffs] back from our customers,” said Krausová.
Travel costs
Automotive transport companies are experiencing similar problems. After decreasing steadily until February, local automotive gas prices have skyrocketed in recent months.
A liter of diesel fuel cost 28.70 Kč in July 2007. Last month, it reached 35.29 Kč, a 5.5 percent increase over May and the highest it’s ever been, according to the ČSÚ. Although the price hasn’t continued its rapid ascent throughout July, the slight decrease reported earlier this month is less than 20 hellers.
The crisis has also forced the hands of the Prague City Council, which in January promised taxi rates would be the sole service not to increase its prices. Seven months later, that promise has been broken by Deputy Mayor Rudolf Blažek, who announced earlier this month that new fares will be introduced in October.
The rate per kilometer will go from its current 28 Kč to 31 Kč, and an additional crown, at 7 Kč, for one minute of waiting time. Until then, local taxi companies will be unable to compensate soaring gas prices with a corresponding fare hike.
“It’s definitely a problem, especially for our airport service,” said AAA Taxi Director Jiří Kvasnička. In addition to being restricted by city regulations, the company’s airport taxi department cannot raise its rates or lower the quality of its services due to stiff competition, he added.
Unlike taxi companies, private transportation companies are exempt from government regulations, allowing them to compensate the climbing gas prices through extensive fare hikes.
Since the beginning of the year, Student Agency has undergone a series of rate increases, raising bus ticket prices 10 percent on most routes in January and announcing a second 8 percent hike on other routes effective July 16. Domestic tickets had smaller increases, an average of 10–20 Kč, said Radim Jančura, owner and president of Student Agency.
International routes had steeper increases on average of 30 Kč, and the company is considering a 5 percent increase in the future on destinations in Western Europe. “It’s only because of the oil,” Jančura said.

Claire Compton can be reached at ccompton@praguepost.com


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