The decrease in annual inflation from 3.5% to 2.9% in Latvia can be explained by the base effect – an unusually rapid rise in prices in the first four months of 2025. Since April 2025, the cost of living in Latvia has hardly changed.
Among the factors that have 'frozen' prices at December levels is a 7.6% decrease in fuel prices.
But what will happen to diesel and gasoline prices next? Unfortunately, Latvia has little influence here. Prices at Latvian gas stations depend on the outcome of the confrontation between the USA and Iran.
– If the USA imposes such strict measures on Iran that shipping through the Strait of Hormuz is halted, the consequences for the oil market will be very dramatic, – promises Latvian economist Peteris Strautins.
At the same time, the basic – non-military – scenario is favorable for fuel buyers, as there is a significant surplus of production capacity and stagnant consumption in the world. Unless OPEC acts in a disciplined manner, which the organization has legendary difficulties with, we can expect a collapse in oil prices. Scenarios with prices even below $40 per barrel are possible.
Additionally, the fall in the global oil price from the current $65-70/barrel to $40/barrel could lead to a decrease in the price of 95-octane gasoline in Latvia from €1.50 to €1.20 per liter.
