Shortage of refined oil products has reached a critical level

TALLINN - Supply disruptions and government interventions to regulate fuel prices are causing sharp fluctuations in gasoline and diesel prices across Europe at a time when the shortage of refined oil products has reached a critical level.

Supply crises in the Middle East and Russia, along with disruptions in refinery operations, have led to a situation in the European fuel market where the market is unstable and fuel stocks are at historically low levels.

The conflict between the US and Iran continues to disrupt refinery operations in the Persian Gulf region, significantly limiting the availability of refined oil products. Russia's decision to extend its diesel export ban has further strained Europe's security of supply. The result is a scarcity of refined oil products at a time when refining margins are at historically high levels.

"Global diesel flow remains 1.3-1.4 million barrels per day lower than a year ago, which has left Europe with a minimal buffer before the autumn refinery maintenance season. It remains to be seen in the near future whether and to what extent the regular autumn maintenance of the plants will be postponed until spring to keep production running in this tense situation," commented Indrek Sassi, head of motor fuel pricing at Circle K.

The production capacity of European oil refineries remains exceptionally high this autumn. TotalEnergies' European plants are operating at full capacity and, according to CEO Patrick Pouyanne, have become a "gold mine." Due to high profit margins, the company postponed maintenance at its Gonfreville plant in northern France until the spring.

To regulate high fuel prices, several European countries have introduced special measures to limit retail prices and ease budgetary pressure. From October 1 until the end of the year, Germany lowered the energy tax on road transport fuels by 14.04 cents per liter and plans to introduce a fuel price cap by January 1, 2027, at the latest.

The Czech Republic will lower the excise duty on diesel fuel from October 1 to 31, limit retail prices for motor fuels, and plans to impose a temporary windfall tax on its only refining company, Orlen Unipetrol.

Italy has introduced price caps through major retailers Eni and IP. For 30 days starting September 28, Eni set the maximum price for diesel at 2.19 euros per liter and for gasoline at 1.99 euros per liter. Since March, the Italian government has approved 15 separate aid packages, costing the state over 2.3 billion euros. Among Estonia's neighboring countries, Latvia has lowered its fuel excise duty to the minimum level allowed by the European Union.

"Last week, the Estonian Association of Transportation Fuels, together with other professional associations, sent a joint appeal to the government to follow the practice of other European Union countries and temporarily reduce the tax burden on fuels. This is to alleviate the energy crisis and prevent a situation where high fuel prices severely impact both households and businesses," said Sassi.

Additional supply restrictions also pose a significant risk to motor fuel prices. U.S. President Donald Trump is still considering a ban on diesel exports to lower domestic prices. According to Goldman Sachs, a complete U.S. ban on diesel exports would raise European diesel prices by three dollars per barrel, or just under 2 percent. Yesterday, Reuters reported that China has halted fuel exports and canceled previously agreed gasoline and jet fuel deliveries for October. In this situation, releasing Europe's strategic reserves could help mitigate the price increases.

"It is expected that European Union leaders will meet on October 15 to discuss the use of emergency reserves, but it must be kept in mind that Europe's gasoline stocks are critically low compared to its diesel stocks," Sassi noted.

According to the European Commission, fuel stocks in the Amsterdam-Rotterdam-Antwerp (ARA) region are below the five-year average but have remained stable in recent weeks.