business
Svalbard: Increased oil prices impact Longyearbyen
The diesel power plant in Longyearbyen, Svalbard, supplies the archipelago with power and heat. The unrest in the Middle East has led to increased oil prices reaching all the way into the Arctic city.
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Increased diesel prices following the war in Iran can be felt even by companies in the far north of the Arctic.
This includes the Arctic archipelago of Svalbard, where heat and power are generated using diesel.
In 2023, Longyearbyen replaced coal power with a temporary energy supply based on diesel. Svalbard Energi operates this energy system, producing power and heat in its diesel-based thermal power plant and boilers.
Small changes, big impacts
At the diesel power plant, even small changes have big impacts as millions of liters flow through the tanks.
The facility uses large amounts of fuel annually.
The General Manager of Svalbard Energi, Torstien Sole-Gärtner, says that the plant purchases diesel for over NOK 100 million a year.
"We are impacted when the diesel price increases since we buy it from the open market," says Sole-Gärtner to High North News about the situation.
"We are currently seeing major variations from day to day. How much we are affected is very dependent on the duration of the high prices, that is, whether they subsist," he continues.
Svalbard Energi's income comes from the sale of power to customers and subsidiaries from the state.
When asked whether there could be adjustments in prices for customers, he says there are no changes being considered in the short term. If the situation with high prices persists, the income from the sale of energy to customers and/or subsidiaries must be increased, he explains.
Vulnerable to price increases
High North News also speaks with the Head of Economic Development in the Longyearbyen Community Council, Lennarth Kvernmo.
He points out that the Arctic town has many industries that require energy, which are also very vulnerable to increases in oil prices. This includes hotels, catering establishments, production kitchens, transport, and logistics.
"The consequences include more expensive cargo transport, higher prices for food and consumer goods, and increased costs for activities such as boat trips, tourist transport, and research equipment," says Kvernmo, adding:
"Increased oil prices could weaken Longyearbyen's attractiveness and investment pace, as companies become less willing to invest. Fewer players will then maintain their presence, tourism and local business may stagnate, and the economic ecosystem in the city becomes more vulnerable."
The Head of Economic Development clarifies that no impact analysis has been conducted on how an increase in oil prices will affect business activity in Longyearbyen.
