Estonia's gasoline prices continue to rise

Gas prices.
Gas prices. Source: Siim Lõvi /ERR

Gasoline prices have risen by 10 cents a liter over the last 10 days despite falling oil prices and fuel retailers see no drop off in sight. Prices may reach €2 per liter again this winter.

The Organization of the Petroleum Exporting Countries' (OPEC+) decision last week to reduce its oil production by two million barrels pushed up the price of Brent crude oil to USD $98.

Analysts forecast this hike would reach Estonian gas stations and it has done so this week, Wednesday's "Aktuaalne kaamera" reported.

Today, a liter of unleaded 95 cost €1.89 and diesel €1.91.

"In the last ten days, a price increase of about 10 cents per liter has occurred at gas stations, and this reflects the impact of OPEC's production cut," said gas station chain Circle K Estonia's sales director Raimo Vahtrik.

"In general, however, analysts are still forecasting a rather upward price trend, and it will probably not come as positive news to anyone, nor, unfortunately, as a surprise that fuel prices are again moving towards the €2 [per liter] mark this winter."

Gasoline station. Source: Ken Mürk/ERR

However, the barrel price has now to USD $93 dollars and may drop more by the end of the week.

"As a rule, we have a certain amount stock available — 5 to 7 days — in the gas stations, and within that range, we can smooth out these price increases or decreases a little," said Vahtrik.

Alexela board member Tramo Kärsna said prices will not change much. He said the immediate price jump was due to OPEC+'s decision.

"The whole market reacted with a jump in the finished product market because of low inventories but it came down immediately when it was realized that the main problem was diesel and the availability of diesel in the future," Kärsna told AK.

"The price of gas will remain the same as today. It is because the summer travel season is over that demand has stabilized. The price of diesel will certainly fluctuate and may rise still, because diesel is also an alternative fuel for natural gas in boilers and homes, and diesel is also more expensive in winter."

Liis Elmik. Autor/allikas: ERR

Swedbank economist Liis Elmik said the oil production reduction is likely to have less of an effect than initially feared. The price is falling due to the economic downturn, which has reduced demand for oil.

"As several OPEC members are already producing less than their production quota, in real terms this will probably mean that around one million fewer barrels of oil will reach the world market per day. As this decision will come into force in November, there will be somewhat less oil on the market from then on. But the oil market is affected by a number of other factors. For example, the economy and politics," she said.

In the long run, prices will fall again.

"If we look at futures prices, oil should fall to somewhere around $80 a barrel by the end of next year," said Elmik.


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Editor: Helen Wright

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