Estonian Oil Association: Reduction in diesel sales volumes worrying

TALLINN – According to the Estonian Oil Association, the decrease in the sales volumes of diesel in Estonia is a worrying trend, as sales of diesel at pump in April were about 3.5 million liters lower than the fuel sector industry body's baseline estimate. 

Mart Raamat, CEO of the Estonian Oil Association, said that while private consumers were hit by a price shock in March, sales figures for April demonstrate that the economic environment of Estonia is also starting to get a blow.

Raamat noted that around 75 percent of all motor gasoline consumed in Estonia is consumed by private consumers, and sales of this fuel fell by 12 percent already in March, with the downward trend continuing in April.

"Diesel is consumed predominantly by the business sector and the sales figures 6 percent lower than forecast show that high fuel prices are starting to hurt our businesses," Raamat said in a press release.

He pointed out that, unlike other European Union countries, Estonia has not yet offered buyers any relief from high fuel prices. 

"If we look at other countries in our region, Poland, Germany and Sweden have all lowered fuel excise duties. Finland and Latvia are moving down the path of temporarily abandoning renewable energy requirements. In both cases, the impact is reflected in lower prices at pump. In today's situation, it is irresponsible to leave our people and businesses alone struggling to survive in the face of unprecedented price increases in fuels," Raamat said.

According to Raamat, the transport sector is faced with a bleak future. 

"Since the excise duty cut on diesel in 2020, the transport sector, which had long been struggling due to unreasonable excise duty policies, has driven Estonia's services exports and last year it generated about seven times more export revenue than before. Latvia's plan to lift the biofuel requirement will bring back the price difference and tax money will again travel to our southern neighbors. The unfortunate consequence of this is a significant reduction in the competitiveness of our companies," the head of the Estonian Oil Association said, adding that a reduction in excise duty on diesel would thus allow to achieve several goas simultaneously.

According to the head of the fuel sector industry body, the sales figures for April already show that the supplementary budget for 2022, which is currently being handled by the Riigikogu, is based on too optimistic estimates.

"In our opinion, a reduction in the excise duty on diesel would help to mitigate losses both in the context of state budget receipts and in terms of stabilizing the economic situation in general. If the government would also like to meet the people of Estonian halfway, then reducing the excise duty on motor gasoline would help to increase people's purchasing power," Raamat said, adding that the resulting increases in the amounts sold mean that the negative fiscal impact from the move would not be necessarily significant.