Not bottomed yet

Photo: Arvo Meeks / Lõuna-Eesti Postimees

Yesterday, major fuel sellers dropped gas and diesel prices by 1.5 cents. The bestseller 95 petrol is now at €1.199 per litre in automatic filling stations. Such cheapness was last seen in the summer of 2011.

Over the weekend, at places it went lower than that. For example, in Viimsi Commune Neste and Alexela offered the fuel for €1.174. By discount card, the litre price went down by two cents standing at €1.154. In euros, we never ever saw petrol price as low as that.

Actually, there’s many a cent worth of dropping space left for fuel prices. Since mid-October, a sharp fall has been the lot of oil product wholesale prices i.e. fuel prices in the Port of Rotterdam. The local fuel sellers did lower retail prices, but not as far as the wholesale prices fell.

As calculated by Postimees, the average mark-up for 95 petrol has risen from former 9–10 cents to 12 cents per litre. The bottom is not reached – as also shown by the low prices in micro-regions like Viimsi.

According to Statoil Fuel & Retail Eesti motor fuels product manager Indrek Sassi, the mark-ups have not gone up as they have come out with the winter diesel fuel which costs a bit over the ordinary one; on the market with prices dropping fast, the mark-up has been negatively affected by fuel stored up and the increasing number of aggressively priced micro-markets and of stations therein.

Motor fuel prices are down due to the dramatic drop of crude oil last week. On Thursday, Brent crude sunk below €80 and the decline did continue both on Friday and yesterday. By last afternoon, the stuff had cheapened by more than a percent. This time, it was due to world’s third largest economy Japan unexpectedly encountering recession.

In its monthly report on Friday, International Energy Agency (IEA), with Estonia as member since last fall, said oil market has entered a new era which due to economic growth slowing in China and shale oil production racketing up in USA makes high prices unlikely. The agency which normally will never predict prices foresees falling process for first half of next year as well – provided of course that there will be no unexpected disruptions with supply.  

There is a pressure on (OPEC) to lower production quotas, but they are yet to reach such consensus. The cartel’s oil ministers are gathering to discuss new production quotas next Thursday.