Estonia is a diesel fuel country, with 700 million liters of diesel fuel sold annually

The sharp drop in world market oil prices due to tariffs imposed by the USA is not immediately noticeable in fuel prices at Estonian gas stations. Alexela's business development manager, Tarmo Kärsna, explains that this is due to the three-day average price calculation mechanism used by Estonian fuel sellers. This means that even with an immediate price decrease, the final price is still affected by the higher prices of the previous two days.

In addition to the world market price and the three-day average, fuel prices are also influenced by the dollar exchange rate, refinery margins, logistics costs, the price of the biofuel component, and taxes, which make up a large part of the final price (60-65%). The retailer's margin, which is fixed in cents rather than percentages, is also important. Therefore, a simple direct correlation between the world market price and the pump price is not easily found.

The majority (80%) of the fuel sold in Estonia comes from the Mažeikiai refinery in Lithuania, which is controlled by the Polish energy company Orlen. This gives Orlen significant market power in Estonia, although according to Kärsna, Orlen's selling price is the same for all Estonian retail chains. However, volume discounts exist, which means that larger buyers receive a better price at the end of the year.

Fuel arrives in Estonia from Orlen's terminal, from where local chains buy it daily. Logisticians constantly monitor price changes and try to delay purchases in anticipation of a price drop to avoid buying more expensive fuel, while also ensuring supplies during periods of high demand.

According to Kärsna, Estonia is a diesel fuel country, with 700 million liters of diesel fuel and 300 million liters of gasoline sold annually. However, the growth of the fuel market has plateaued mainly due to the decrease in transit traffic and the transition of urban transport to gas and electricity. Kärsna does not foresee a rapid decrease in fossil fuel consumption.

He believes that the transition to electric vehicles will be slow, and diesel fuel will still be sold in Estonia in 2040. In his opinion, internal combustion engines will remain in use even until 2050–2060. Kärsna gives the example of the Norwegian paradox, where diesel fuel consumption has increased despite the high proportion of electric vehicles. He predicts that gasoline consumption in Estonia will start to decline around 2027.

Charging electric vehicles is hindered by economic (network fees) and practical (charging possibilities in apartment buildings) problems. Kärsna does not believe that electricity sales will compensate for the revenue from fuel sales, as most charging takes place at home, and the throughput of public charging is limited. Alexela is investing in fast chargers with the aim of changing its business model – charging is an incentive to earn revenue from the sale of other services (food, drinks).

European Union directives, such as RED3, are forcing more and more expensive biofuel components to be mixed into fuels, which creates uncertainty in the market. A debate is ongoing regarding a volume-based or greenhouse gas-based approach to determining the proportion of biofuels. In the future, increases in diesel excise duty and the ETS2 carbon price for transport, applicable from 2027, will also increase the price pressure on fossil fuels. Kärsna does not believe that Estonia will be able to postpone the implementation of ETS2.

As the sale of liquid fuels is a declining business in the long term, fuel sellers are looking for new business models and investing in alternative energy solutions such as electric and hydrogen filling stations. Alexela's goal is to integrate different energy solutions into a whole, offering customers convenient services and thereby increasing customer loyalty.

Source: Delfi Ärileht