Competition irritated over slow progress in Olerex criminal case

An Olerex gas station.
An Olerex gas station. Source: Ken Mürk/ERR

Fuel retailers are eagerly awaiting the Central Criminal Police and the Environmental Board's criminal proceedings against competitor Olerex to result in a punishment, while there are no updates.

Fuel sellers in Estonia pointed out last year that their competitor Olerex was not complying with the obligation of carrying enough biofuels. The Environmental Board said in June that it will team up with the Central Criminal Police in criminal proceedings meant to establish whether the Estonian gas station chain has presented the Tax and Customs Board with false data to bypass the biofuel requirement.

The investigation is still ongoing, and ERR learned little when it asked the Environmental Board whether any progress has been made.

"The proceedings are ongoing and we have no new information to share with the public," said Olga Eskor, chief PR specialist for the agency.

Olerex's competitors are less than pleased with this perceived lack of progress.

Tarmo Kärsna, head of energy sales at Alexela, told ERR that fuel sellers are eagerly awaiting a decision as legal clarity is needed in terms of whether Olerex's conduct is permissible or not.

"If they did what the public details of the case suggest they did, it gives them a considerable price advantage," Kärsna suggested. "And if they're continuing with the same scheme, they have a clear edge over the competition."

Annika Peetsalu from law firm Cobalt representing Terminal Oil said that the proceedings should be carried out as quickly and effectively as possible as the case's circumstances and facts should not be difficult to determine – the investigators will simply need to determine whether Olerex has complied with the biofuel component requirement or not.

Terminal believes that Olerex continues to ignore the biofuel rules. Peetsalu said that the law provides clear alternatives to selling motor fuel with a biofuel component (which most gas stations in Estonia do not – ed.), including buying market statistics or carrying other environmentally friendly fuels.

However, there is not enough available statistics to cover Olerex's sales volume and the company does not carry enough fuels that are considered environmentally sparing for the purposes of the law. Peetsalu suggested this means Olerex's only viable option is to add enough biofuel to the motor fuels it sells.

"Mixing in biofuel requires clearly marking this fact at the pump, which we cannot see in Olerex stations. Because there is no such information, the only possible conclusion is that Olerex is not complying with the biofuels requirement. Olerex likely did not comply in 2021, definitely did not comply last year and probably isn't complying now," Peetsalu said, adding that the longer this is allowed to continue, the more damage is done to other market participants.

Kärsna said that Olerex's price proposals seem to be cheaper by as much as the biofuels obligation would add. He mentioned as a another potential risk importing so-called laundered Russian diesel fuel as it is available for less on the world market.

"Whether they are keeping it up or not, but such price slashes (on the wholesale market – ed.) are incomprehensible, and those are two possible hypotheses for what's behind them," Kärsna said.

Punishments do not motivate compliance

Fuel sellers suggested last fall that it may be cheaper for Olerex to pay the €10 million fine than comply with the biofuel requirement.

Alexela's representative said that while the fine amounts were sensible back when they were first introduced, they have become outdated looking at market volume today.

"Our estimate is that Olerex has gained around €30 million [through these practices] and would still be €20 million in the black if they were ordered to pay a fine of €10 million," Kärsna said, adding that the Transport Fuel Association has proposed gigawatt-hour-based fine amounts. "This would also make sure those who miss the biofuel target by a few thousand liters would not be fined the full €10 million."

Terminal's calculations roughly match those made by Alexela. Peetsalu said that Olerex has an advantage of 5-10 cents per liter compared to its competitors. Because Olerex is also the motor fuels market leader in Estonia and shifted 300-400 million liters of fuel last year, it saved €30-40 million by failing to comply with the biocomponent requirement.

The legal counsel said that this cost advantage allows Olerex to woo wholesale customers with offers its competitors just cannot afford to match. Peetsalu added that the case should be sent to court in criminal procedure and other market participants given the opportunity to file civil suits.

Peetsalu also suggested that Olerex needs to compensate the other market participants one way or another, and that should violations be confirmed, its activity license should be suspended, possibly even during proceedings. She went as far as to suggest the true beneficiaries could be handed shock prison sentences and have their illegally obtained assets seized.

She said that should the authorities fail to properly react, the Estonian taxpayer might be looking at an EU fine down the road, and that failure to order effective sanctions will send other market participants the clear signal that complying with the biofuel obligation is not important and that it is simpler and cheaper to ignore the regulation and pay the relatively modest fine.

Tarmo Kärsna from Alexela agreed, adding that the scheme continuing constitutes blatant injustice toward other fuel market participants.

Olerex has nothing further

ERR asked Olerex to comment on the matter but had not received any comments by Wednesday morning.

The company has previously suggested that the investigation might constitute an information operation targeting the market leader.

"The company and the Environmental Board have all the necessary information to overturn these misleading allegations," Olerex said in June.

According to the Liquid Fuel Act, fuel sellers must ensure that the fossil fuel they sell contains at least 7.5 percent renewable fuels.

The Environment Agency found last summer that Olerex will very likely not be able to comply with the requirement by the year's end. Despite repeated warnings, Olerex only managed to offer 1 percent of renewables.

On December 30 last year, the Tax and Customs Board tested a tanker bringing fuel for Olerex and found it to be ordinary fossil winter diesel. However, Olerex reported two weeks later that the tanker had brought renewable HVO diesel that would have put its renewables share at 7.51 percent.

The Central Criminal Police launched criminal proceedings in June of this year to determine whether Olerex has presented false data to the tax authority to avoid complying with the biofuel requirement.

A Ministry of Climate bill now aims to shorten the biofuel requirement control period from the current 12 months to six months and introduce a unit-based fine amount. According to the initial proposal, the sum would be €125 per gigawatt-joule of energy short of the target by the end of the half-year period. The Environmental Board would also be given powers to pull the activity licenses of fuel sellers who fail to comply.


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Editor: Marcus Turovski

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