Estonia's fuel prices swing daily as retailer price war becomes 'new norm'

Fuel prices at Estonian filling stations are now changing several times a day or at least daily, driven primarily by a prolonged price war among retailers rather than by international developments such as the Iran crisis.

On Wednesday, diesel prices at some stations rose above €2 per liter, only to fall again by Thursday. Terminal board member Alan Vaht explained that the price war has been running for more than a year, since September 1 last year, and has recently intensified, with weekly price swings of 10 to 15 cents or more becoming common.

Alexela's Tarmo Kärsna agreed that domestic competition between filling station chains, rather than shifts in global oil markets, is now the main driver of daily price changes in Estonia.

How the price war began

The competition began a year ago when the Neste chain dropped its loyalty programs and cut prices below competitors' levels. Other market players followed suit, scaling back or abandoning their own loyalty schemes, since customers are highly sensitive to price differences.

Neste Estonia CEO Polina Tkatšuk said the Estonian fuel market is highly competitive, which benefits customers through a wide range of offers and favorable conditions, prompting retailers to monitor the market closely and react quickly to changes.

While a year ago many believed such a price war could not last, it has since become the new normal. Kärsna noted that this is good for consumers, since prices are sometimes very favorable, but it also creates uncertainty about the best time to buy fuel.