Head of oil association: Excise cut better way of lowering fuel prices

Fuel prices in Estonia on Wednesday, March 16, 2022.
Fuel prices in Estonia on Wednesday, March 16, 2022. Source: Siim Lõvi/ERR

It would be sensible to lower excise duties in order to mitigate high fuel prices in Estonia instead of removing the biocomponent in fuels, as Latvia and Finland to some extent, have done, said Mart Raamat, head of the Estonian Oil Association.

Latvia is mulling temporarily lifting the requirement for gasoline and diesel to contain a certain amount of bioadditives in hopes of lowering fuel prices to rein in inflation. Finland has also decided to lower the required concentration of bioadditives to bring down the price.

Raamat said that in Estonia's rather complicated system, abolishing the biofuel component requirement would rather result in a lot of confusion and a potential claim for damages from retailers. Such a decision would also harm Estonia's green policy goals.

"That is why it would probably be more sensible to consider slashing excise duties that would produce an immediate effect at the pumps without disrupting other policies. Dependence on fossil fuels is a wider problem. That is why it would be more sensible to revise excise duties," Raamat said.

He said that lowering the duties to the lowest level permitted in the European Union would take more than 20 cents off the price of a liter of gasoline.

"It is not that simple for diesel as we are already close to the minimum duty rate, with the price coming down just 6 cents per liter."

Dropping the biocomponent requirement would create confusion as retailers are not expressly obligated to mix in biofuel at preset and can comply with the requirement by offering biomethane.

"It would be more difficult in Estonia compared to neighboring countries because we have a special system where retailers who sell biomethane do not have to mix in biofuels. They have a legitimate expectation for current policies to be retained and will ask who will compensate them in a situation where they will still have to offer biomethane," Raamat said.


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Editor: Marcus Turovski

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