US embassy cable - 05LJUBLJANA653

UNCLAS LJUBLJANA 000653 
 
SIPDIS 
 
 
DEPT FOR EUR/NCE, EB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: ECON, ENRG, SI 
SUBJECT: HURRICANE KATRINA AND ENERGY SUPPLY DISRUPTIONS IN 
SLOVENIA 
 
REF: SECSTATE 163206 
 
1. (U) Summary: Econoff delivered reftel points 8 September 
to Miro Vidmar, Head of the Division for Oil, Food Supplies 
and Reserves at the Ministry of the Economy.  Vidmar said 
Slovenia was concerned with the potential for continued price 
increases in the wake of the Katrina tragedy, but felt that 
Slovenia was not at risk for any near term interruption in 
energy supply.  Vidmar said that the chief concern for the 
Slovene economy was the effect that a continued rise in 
gasoline prices would have on inflation and how that in turn 
could impact Slovenia's adoption of the Euro.  Vidmar said he 
was traveling to Brussels to participate in an EU meeting on 
9 September on addressing prospective shortages from an 
EU-wide perspective. 
 
2. (U) Also on 8 September, Econoff met with Ksenija Stupan, 
Director of petroleum products purchasing at Petrol, the 
leading energy products supplier in the Slovene market.  Like 
Vidmar, Stupan said that supply was not a problem currently 
but that the upward pressure on gasoline prices was in part 
being driven by insufficient and outdated refineries.  While 
Stupan did not anticipate significant near term increases in 
prices at the pump, she noted shortages in refined petroleum 
products could result from increasing demand from China as 
well as from newer and increasingly wealthy EU member states. 
 End Summary. 
 
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Price Increases the Main Concern 
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3. (U) Vidmar did not anticipate any oil availability risk to 
Slovenia in the next 6 months, Slovenia maintains a 70 day 
buffer stock of petroleum products and, in accordance with EU 
guidelines, plans to increase this to 90 days over the coming 
months.  Vidmar said, however, that while there was enough 
product available in the market, he expected price hikes to 
continue for the forseeable future.  He said the government 
has decreased excise taxes on gasoline and other refined 
petroleum products to the bare minimum and that prices would 
have to rise "at least 10 percent" in the near future. 
(Note: The GoS uses an excise tax as a buffer to insulate 
consumers in Slovenia from dramatic increases in pump prices. 
 As the underlying wholesale price of gasoline has risen, the 
GoS has decreased the excise tax in order to keep the retail 
price relatively stable.  According to Vidmar, the government 
has decreased the excise taxes as much as possible and 
therefore the retail price will now have to climb.  End note.) 
 
4. (U) Slovenia is currently in the process of meeting the 
Maastricht criteria to adopt the Euro as its currency, with a 
target date for the changeover of January 2007.  While 
Slovenia is well within the limits of most criteria, it has 
yet to lower its inflation rate sufficient to meet the 
Maastricht standard.  In the past year, despite increases in 
petroleum costs, Slovenia has been consistently able to push 
its inflation rate lower.  Vidmar speculated that continued 
hikes in oil and gasoline prices could soon begin to have a 
larger inflationary impact and threaten Slovenia's adoption 
of the Euro. 
 
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Refineries (or lack therof) are the Problem 
------------------------------------------- 
 
5. (U)  Petrol's Stupan also told Econoff she was not 
concerned about a possible near term shortage of petroleum 
products.  She said, however, that it was an insufficient 
number of refineries that was having a larger impact on the 
price of gasoline than simply the increase in the price of 
oil.  Stupan noted that while growing demand from China was 
certainly having an impact, demand from new EU member states 
was also causing an upward pressure in prices.  Stupan said 
the refineries in the Mediterranean (that provide much of the 
supply for Slovenia and other countries in the region) were 
outdated and insufficient.  Stupan further noted that the 
demand for cleaner fuel in the EU was also exacerbating the 
refinery bottleneck.  Like Vidmar, Stupan acknowledged that 
the GoS had little room to cut excise taxes further to 
maintain prices.  Stupan noted, however, that there will more 
likely be a gradual uptick in energy costs rather than a near 
term spike. 
ROBERTSON 
 
 
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 2005LJUBLJ00653 - Classification: UNCLASSIFIED 


 
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