Bioadditive requirement causes retailers to stockpile months' worth of fuel

Gas station.
Gas station. Source: ERR

If during an average month, retailers usually buy around 100 million liters of motor fuel from excise warehouses, tougher bioadditive requirements entered into force in 2020 caused fuel sellers to buy over 200 million liters in December of last year. Bioadditives are expensive and retailers have as long they need to sell already stockpiled fuel.

If normally, excise warehouses part with around 20-28 million liters of gasoline a month, the figure was 41 million liters in December of last year. The spike was even more noticeable when it came to diesel – the monthly average of 60-80 million liters jumped to a whopping 180 million liters in December.

"Stockpiling late last year had to do with tougher bioadditive requirements stepping into effect as a result of two new directives this year," Merliin Laos from the Ministry of Finance's fiscal policy department said. The analyst added that motor fuel, with the exception of 98 gasoline, needs to include 10 percent biofuel either physically or statistically, instead of the earlier required content of 6.4 percent.

"The bioadditive requirement needs to be complied with when the fuel is checked out of the excise warehouse, meaning that quantities declared last year were subject to the lower 6.4 percent requirement. /…/ In addition to the directives, our retailers are also affected by neighboring countries with whom there are already considerable differences in the price of fuel that could grow further as we've received signals Latvia and Lithuania might not comply with the fuel quality directive in full," Laos added.

The Estonian Oil Association that represents retailers said that such stockpiling has happened in the past. "The previous such spike took place in March when warehouses gave out 37 million liters of gasoline and 124 million liters of diesel. April introduced the 6.4 percent biofuel requirement. The market has also reacted similarly to excise duty hikes," said head of the association Mart Raamat.

"Because the world market prices of biofuels are twice as high or higher still than those of fossil fuels, such practice helps reduce the aggregate effect of the price of fuel on society in the volume of several million euros," Raamat said.

The Ministry of Finance estimates that stockpiles from December should affect excise duty receipt for five months. The oil association believes stockpiles will run out in March.

Starting from March this year, fuel sellers must ensure that their products include at least 10 percent of biofuel as a weighted average value between June 30 and December 31. How to comply with the requirement is largely up to retailers, including selling 100 percent renewable biomethane or electricity," Laos noted.

"The important thing is for fuels with varying concentrations of biocomponents to result in the required 10 percent total biofuel sales at the end of the ten-month period. At least 6.4 percent of total fuel energy must be ensured as physical biofuel energy," Laos added.


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Editor: Marcus Turovski

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