Without taxes, diesel fuel in Estonia most expensive in EU

TALLINN - The European Union's weekly price collection of fuel prices indicates that, without taxes, diesel fuel in Estonia is the most expensive in the EU, while Estonia's 95 octane gasoline is the second most expensive in the union, the daily Postimees writes.

Despite the fact that the fuel excise duty in Estonia is significantly lower than in Finland, this week people could buy cheaper gasoline than here in several of the northern neighbor's filling stations. While the price of oil has been in a downward trend for everyone so far, sharp competition gave an additional impetus to the decrease in Finland.

According to Tero Kallio, CEO of the Association of Finnish Automobile Importers, an extreme price fluctuation of about 30 cents between gas stations is typical.

"There are many filling stations and each company sets its own prices," he told the Finnish daily Helsingin Sanomat.

However, logistics are expensive, so prices in Helsinki are 10 cents cheaper than in northern Finland.

In addition, gasoline together with all taxes is more expensive in Estonia than, for example, in rich countries such as Austria and Belgium.

Fuel seller Neste Estonia board member Ülle Tamme only said that fuel prices are affected by many things: world market prices, exchange rates, taxes and local competition.

"These are factors that, together with global events, affect fuel prices," she said.

Indrek Sassi, head of motor fuel pricing at fuel retailer Circle K Estonia, said prices are entered in the EU price collection table without VAT and excise duty. In this table, the basis of the retail price of diesel fuel in Estonia is 1.524 euros per liter, from which excise duty and VAT have been deducted, resulting in 0.898 euros per liter.

"This figure includes several parts, such as the cost price in the region, renewable energy obligation, labor costs, minimum stocks tax, refraining from Russian oil products, as well as handling costs," Sassi said. "While most European Union member states have their own fuel production, Estonia does not have a refinery, and all fuel must be imported and stored in the country, which affects the component of handling costs."

At the same time, he stressed that all the aforementioned price components cannot be adequately compared across countries, so the handling cost may be only one of the reasons for the price difference.

"Furthermore, we do not know under what price conditions fuels are sold domestically in countries where there is production, so we also cannot make a comparison regarding profitability," Sassi added.

Alexela's energy sales division manager Tarmo Kärsna said that logistics have a strong impact on the price in countries where there is no refinery -- a comparison can be made here between the Baltic countries, where a refinery is located in Lithuania.

"Looking at the Nordic countries, where the factories are located in the southern part of the countries, domestic logistics affect the price there," he said.

According to Kärsna, the fact that in recent months there have been large price fluctuations on the local market every week, where prices can vary by up to eight cents per liter during the week, also plays a role in Estonia's first place.

"It largely depends on what prices were valid at filling stations at the time of data collection. Looking at the longer timeline, Estonia is among the first third with its prices, which is largely determined by our distance from refineries and therefore higher logistics costs," he said.

Terminal board member Alan Vaht said that as of Aug. 8, the prices of gasoline and diesel fuel in Estonia without taxes are respectively 7.5 and 9.2 cents per liter higher than the European average prices.

"To put it bluntly, the Estonian fuel market is listing and this is an anomalous situation," Vaht said.

According to him, the fuel market started to list already in mid-2021 and has not recovered from the list to this day.

"The mentioned time coincides with the time when the first suspicions of biofuel fraud arose on the fuel market," Vaht said. "The problem lies in the fact that the failure to make the financial expenses required to fulfill the bio-obligation allowed one market participant to be in a position where it could lower fuel prices both on the wholesale market and on the retail market for large customers who fill up with fuel at a fixed price."

According to him, in order to keep such large customers, other fuel sellers have been forced to sell fuel at the purchase price or to pay extra for the fuel. As a counterweight, the fuel market has developed a higher sign price at the filling station.

"In this situation, the winners are large customers who fill up with fuel at a fixed price, while the losers are private consumers and small businesses who fill up with fuel at the sign price or with a discount from the sign price," Vaht said.

The described sign price anomaly is also clearly visible in the data of the Weekly Oil Bulletin of the European Union, if one were to compare the sign prices of Estonian filling stations without taxes with the average sign prices of the EU.

"Such a comparison without taxes directly shows how big the filling station fuel markup is in different countries," Vaht said.