Competition squeezes station margins

  • 2004-10-06
  • Baltic News Service
TALLINN - The managers of two leading fuel retailers have said that gas-online prices were nearing a critical point as intense competition has prevented retailers from increasing the cost in line with world prices for crude, a situation which is squeezing retailers' margins.

"In Europe and elsewhere in the world the price of gasoline and diesel in particular has climbed by about $50 per ton in the two past weeks, which translates into about 0.50 kroon (0.032 euro) per liter in retail," said the general director of Neste Eesti, Indrek Kaju.

But the stiff competition has prevented Estonian retailers from following this trend. "Retail prices now are quite close to the critical limit from where one cannot go a lot lower," Kaju said.

Kaju stressed that Neste was not selling motor fuel below purchase price, nor did it intend to in the future either.

Antti Moppel, marketing chief for Olerex, said the retail price had been at odds with the world market for several months.

"The reason lies in domestic competition," Moppel said. "Neste has announced it would like to increase the price difference between manned and unmanned stations from the present 0.25 kroon to 0.35 kroon per liter, whereas Statoil has said that this is not grounded," he said.

Neste has a network of unmanned stations across Estonia, while Statoil's network is made up to a big degree of manned service stations.

As Statoil has responded to each price cut by Neste with a similar move, retail prices have declined to the point where it begins to hurt, Moppel explained.

Prices of motor fuel rose in Estonia for the last time on Sept. 27 - 28, when retailers added 0.50 kroon to the per-liter cost. Yet on Sept. 29 major retailers lowered the price again by 0.10 kroon, cutting it by a further 0.10 kroon on Sept. 30 - Oct. 1.