Alexela board member: Diesel could cost less than a euro a liter next week

Gasoline and diesel prices at a Tallinn filling station on April 24. Source: Siim Lõvi/ERR

The price of diesel, already set to drop to just over a euro per liter from Friday, could fall below a euro per liter soon after, according to one fuel industry spokesperson. Gasoline prices may also see a more modest drop of two or three cents per liter, having already fallen in recent weeks.

The government cut excise duty on diesel as part of its economic aid package in the wake of the COVID-19 pandemic, meaning from Friday, May 1, fuel sellers are likely to lower prices at pump by 14.5 cents per liter, from the current level of €1.199 per liter, which it has been at for a couple of weeks, at least in Tallinn, to €1.054. 

However, Alan Vaht, board member at fuel company Alexela, noted that the price of diesel fuel will probably fall more in early May. 

"If not on Friday, then next week, prices may dip below one euro. I think we will see prices posted below the euro in the next week," he added.

Petroleum, not subject to excise cuts in Estonia but seeing falling prices due to the wordl slump in oil prices, may also see a drop of a couple of cents, he added.

"While we saw a big drop in the price of petrol in March, the price of diesel has fallen after a slight delay," said Vaht. 

"I believe that if we look at this week or next week, we will also see some drop in the price of petrol at filling stations. How much - I would venture to say a couple of cents."

This will also have a downward effect on diesel prices, he said.

"Based on the world market price, the price of diesel will fall further and the price of petrol will definitely fall as well. Maybe this week or maybe the next, but they will definitely come down," he noted.

95-octane gasoline has also stood at €1.199 per liter recently.

Vaht noted that people are not driving as much as had been the case before the crisis, so demand has also helped the retail price of petrol fall which in turn forces the price to remain stable, he said.

Sales volumes of 95-octane gasoline in March dropped by as much as 40 percent year-on-year, he added.

Daily fluctuations in fuel prices have stopped

Vaht also noted that whereas in the past there was a greater fluctuation in fuel prices at filling stations, now fuel sellers are being charged with fixing prices at the same level. 

"For four years we had a period when we saw a very heated struggle in the Estonian fuel market," he said. "This fight was pretty tiring for everyone in the market."

Vaht added that fuel companies have been hit by an avalanche of issues. "I say without hype that, compared with our neighbors, our prices are at the absolute peak in Europe," he said, adding that this was the result of domestic political decisions, primarily the move in 2015 to increase fuel excise duty annually.

According to Vaht, diesel excise duty is higher than in Estonia only in Ireland and the Netherlands. 

"There is a lot of comparison here with Latvia and Lithuania - a price fight and price war has been going on in Latvia for several months, it has been taking place in Estonia as well."

Part of the aim in reducing the excise was to bring Estonian diesel prices in line with those of Latvia and Lithuania, to prevent custom leaving the country. Gasoline prices fell as early as March as noted, and are not expected to fall further.

Another factor behind higher fuel prices is differing biofuel obligations compared with Estonia's neighbors. 

"While Estonia has decided to fully comply with both the 10 percent biofuel obligation and the six percent greenhouse gas (GHG) reduction obligation, Latvia and Lithuania have decided to go down the "sugar fine" route and shoulder fines impösed for non-compliance with the GHG obligations," Vaht said.

"This means the direct costs associated with both of these obligations have been taken into account in fuel prices in Estonia, but at the same time this is not done in Latvia and Lithuania," he added. 

"Estonian consumers have been put in an awkward situation. In Latvia and Lithuania, fingers are being examined, figuratively speaking, nationally. This has been our political choice, and politicians have set this matter on this course."

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Editor: Andrew Whyte

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