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High jet fuel prices to lead to more expensive airline tickets in Norway

Soaring jet fuel prices are likely to lead to more expensive airline tickets and fewer routes being offered for passengers in Norway, analysts have predicted.

A Norwegian Air Shuttle plane taking off.
High jet fuel prices will likely lead to more expensive airline tickets. Pictured is a Norwegian Air Shuttle plane. Photo by 72JanJ on Flickr.

Over the previous week, jet fuel prices have risen by 33 percent due to soaring oil prices, and analysts have predicted that these increased costs will be passed onto airline passengers in Norway.

“It means that someone has to pay for it (the increased cost). So it is likely that higher ticket prices and, potentially, routes that can no longer be counted on (to be sold out) will be temporarily closed,” Hans Jørgen Elnæs, an analyst with Winair, told financial media publication E24.

Elnæs said that among the routes that could potentially be scrapped are ones to Asian destinations that have to divert to avoid Russian airspace, which is closed to aircraft from Norway and dozens of other countries.  

In a different interview with public broadcaster, NRK Elnæs said that customers would begin to see the rising fuel costs reflected on their ticket by the turn of the month.

“We have not yet seen any significant change in pricing with the airlines, but I am sure that there will be an increase in the price during March or the beginning of April,” Elnæs told NRK.

The fuel rises are set to impact airlines in Norway, particularly as some of the largest airlines in the country, such as Norwegian Air Shuttle, Flyr and SAS, don’t have a fixed price agreement on fuel, meaning they pay current market prices.

Norwegian Air Shuttle have said that rising fuel costs were likely to lead to higher overheads, but it hadn’t decided on raising ticket prices just yet.

READ ALSO: Even higher costs predicted as Norway sets new record for electricity prices

“Ticket prices are always controlled according to supply and demand. We have not decided on a fuel surcharge now,” Eline Skari from Norwegian Air Shuttle’s press office told NRK.

However, even airlines that have secured fuel price agreements, such as Widerøe, have said that ticket prices will rise eventually due to increased costs.

“The sharp increase in oil prices will, in the long run, have to lead to an increase in ticket prices,” communications director Silje Brandvoll, communications director of Widerøe, told E24.

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MONEY

EXPLAINED: What the revised national budget in Norway means for foreigners 

The Norwegian government has presented its revised budget for 2022. Here's The Local's roundup of some of the key proposals and what they mean for your wallet.

EXPLAINED: What the revised national budget in Norway means for foreigners 

Electric cars to become more expensive

The government will replace the VAT exemption for electric cars with a subsidy scheme. This means that electric cars that cost over 500,000 kroner will be subject to VAT, while EVs that cost less will be exempt from VAT. 

The government has said the cost of buying an EV with a sticker price of 600,000 would become 25,000 kroner more expensive. 

An EV costing more than a million kroner will become 125,000 kroner pricier, according to the government’s proposals. 

“If you can afford to buy a car for 1.7 million, it is only fair and reasonable that you also pay VAT,” Finance Minister Trygve Slagsvold Vedum said of the announcement

The scheme will come into effect next year. 

Free ferry tickets

All ferry journeys on routes with less than 100,00 passengers will be free from July 1st. This is likely to make around 30 of Norway’s 130 connections completely free of charge. 

The free trips will apply to local residents, tourists and other travellers. 

READ MORE: Why some ferry routes in Norway will be completely free this summer

It’ll become easier to get a better deal on energy prices 

The government will offer five million kroner in funding to help improve the Consumer Council’s electricity price comparison site strømpris.no.

The funding will make the comparison site better so that both spot price and fixed price customers can get the best energy deal available and save money. 

The government expects high electricity prices to continue

The government has written in its revised national budget that it expects high energy prices to continue. 

Tax revenues from the power companies will be used to cover the expenses of the electricity subsidy scheme, which sees the government pick up 80 percent of energy bills when the spot prices rise above a certain amount. 

Experts: Loan and mortgage repayments to increase faster

Loan and mortgage repayments could go up more quickly than anticipated due to increased oil spending, business and financial site E24 reports. 

In the revised budget, the government has said that it plans on spending 30 billion more of revenue from the oil fund than previously expected. 

“I think this is a somewhat more expansive use of money than Norges Bank (Norway’s central bank) had envisioned, and in that sense, I think that in isolation, it could contribute to a higher interest rate path, not strongly, but somewhat higher,” Kjersti Haugland, chief economist at DNB, told E24. 

If Norges Bank raises the key policy rate, lenders will follow suit meaning the loan or mortgage becomes more expensive to repay. 

Counties will be split up to improve local services

Viken will be divided into Akerhus, Buskerud and Østfold. Vestfold og Telemark will be split into two, as will Troms og Finnamrk. 

If parliament can make a final decision before the summer, the division will take place from January 1st 2024. 

The government wants to split the counties to improve the availability of local services in these areas, according to a press release from the Ministry of Local Government

Air passenger tax scrapped for the rest of the year

The air passenger tax, which was shelved for the last few years, will also be frozen until the end of the year. 

Cut in support for public transport

The government will be cutting its support scheme for public transport firms hit by a loss of income related to the pandemic from July 1st. 

For consumers, this means that some firms will cut the routes they offer due to the funding ending. 

Ruter has said that it is already cutting the number of routes from July 4th as passenger numbers are not back to pre-pandemic levels.Routes could also be cut in Oslo and Viken

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