Gasoline and diesel fuel prices need to go up one more time before coming down, as there was no significant decrease in fuel consumption even at current high prices, Terminal Oil Grupp board member Raido Raudsepp said.
In an appearance on Vikerraadio's "Vikerhommik" morning program on Thursday, Raudsepp said that fuel prices in Estonia peaked ahead of Midsummer, following which markets have seen a steady decline.
"Can I bring good news yet? That I can't promise," he said. "My belief is that before bringing prices all the way down, they need to go back up one more time. There was no major decline in consumption at high prices. I personally believe we'll see €2 [per liter] again toward fall."
He explained Estonia's high fuel prices with a "perfect storm" on the markets. The airline industry, for example, has bounced back exceptionally quickly — while experts had forecasted air travel to recover in 2023-2024, people are already flying more than they were prior to the COVID-19 crisis.
According to the fuel retailer, one opportunity to bring fuel prices down would be to reduce excise duties on fuel.
"I can cross my heart and say that if the excise duty is reduced, fuel prices will decrease as well," he said. "There has been a lot of talk about Germany and Poland, where a reduction in excise duties never reached the markets. It actually hit the markets right away, but as prices went up on the world markets at the same time, that swallowed the effect [of the reduction] within a week."
Raudsepp explained that in Estonia, national taxes — excise duties and VAT — account for half the price of fuel, and if Estonia were to reduce the excise duty rate to the EU minimum, gasoline would immediately be 25 cents cheaper and diesel fuel five or six cents cheaper per liter.
"As [Terminal Oil is] currently leading the drop in prices in Estonia, then I know that this takes place automatically and that an excise duty reduction is reflected immediately on gas station price boards," he said.
A five-cent reduction in fuel prices would mean Estonian residents saving a combined €150,000 per day, or €4.5-5 million per month, he continued, noting that 3 million liters of fuel are sold a day in Estonia.
Raudsepp also addressed the widespread belief that unlike supermarkets, fuel sellers negotiate prices among themselves.
"I've never seen a price board for curd snacks in front of supermarket chains, for example," he said. "And stores carry 70,000-80,000 different products. Fuels have three or four. Yes, gas station chains keep a close eye on others' prices. Unfortunately, nobody lets anyone sell fuel on the market for cheaper than the others for very long. If we drop [prices], the rest of the country has followed within half an hour. On the upside, there are no longer significant price differences across Estonia, meaning fuel doesn't cost 10 cents more in Viljandi than it does in Tartu."
The fuel retailer board member said that fuel prices are likewise impacted by both residual goods as well as purchase prices. He noted that sometimes it's a good idea for a fuel retailer to sell fuel purchased at a higher price for cheaper at gas stations so that they can buy new fuel at a lower price.
Raudsepp is sure that the lower fuel prices go, the more consumption will bounce back.
Editor: Aili Vahtla