Director General of the Estonian Competition Authority Evelin Pärn-Lee said Monday at a sitting of the Riigikogu Anti-Corruption Select Committee to discuss fuel market transparency that fuel prices are formed on the free market and are not regulated by the authority. The authority carried out an analysis of the fuel market because many had raised the question of why Estonia's fuel market for a long time appeared so unusual, with fuel retailers consistently displaying identical prices.

Pärn-Lee recalled the 2022 energy crisis and noted that when prices rose, they did so quickly, but when they fell, the decline was slow. However, the authority's analysis did not identify any prohibited cooperation between fuel companies.

"As a result of the analysis published in 2024, we continued monitoring the market and I am very pleased to say that the Competition Authority has reached a point where fuel retailers no longer display identical prices on their boards," Pärn-Lee said, confirming that there are currently no proceedings underway related to price movements.

According to the head of the authority, their analysis showed that price differences between fuel station chains emerged in the fall of 2025, whereas before that, prices had been very similar. The chains have changed their behavior, for which Pärn-Lee commended them.

Pärn-Lee pointed out that when looking at price charts reflecting fuel prices excluding taxes, after the outbreak of the war in Ukraine, Estonia's price level remained significantly higher for a long time than in Latvia, Lithuania or Poland.

"This is the period when prices on the boards were identical and when the Competition Authority developed an interest in this market," she said.

However, on the chart, the line representing Estonia's price drops sharply around September of last year when fuel companies began a price war among themselves. According to Pärn-Lee, this illustrates that prices in Estonia had for several years been generally higher compared with many other countries.

Alan Vaht, who sits on the management boards of the Estonian Transport Fuels Association and retailer Terminal, said he has conducted numerous analyses and that in reality there are many situations where global market prices rise while prices at fuel stations actually fall.

"Fuel prices are emotional. When we hear that global market prices are rising sharply and, on the same day, a fuel station chain raises its price, the increase at the pump may not be related to the global market price increase at all," Vaht said.

He added that even if the war were to end and global market prices were to fall, this would not necessarily mean an immediate drop in retail fuel prices, as fuel is purchased either at the average price of the previous three days or the three-day average preceding the previous day. This creates a lag in pricing.

"The myth that when global market prices fall, fuel station chains deliberately delay lowering prices is not true, even though it stirs emotions. In reality, retail prices move in step with the global market," said the Terminal board member.

According to Vaht, it is also untrue that fuel prices at stations have risen more than global market prices following the outbreak of the Middle East conflict. He cited an example: comparing gasoline prices before the war, on February 26, with current levels, global market prices have increased by 29.2 cents, while in Estonia the increase has been 23 cents. Diesel prices have risen by 48.6 cents on global markets over the same period, compared with 41 cents in Estonia.

"I would very much like to understand where the factual evidence is and on what basis you claim that pump prices have increased more than global market prices," he said.

Fuel price formation

Vaht explained the formation of fuel prices by noting that 70 percent of Estonia's fuel market is supplied by the Orlen refinery in Lithuania. Many fuel station chains have annual contracts in which pricing formulas are agreed in advance.

"Fuel station chains have two options: either to purchase a larger stock of fuel into storage or to buy smaller quantities day by day according to current market needs," he said.

Vaht added that if a fuel retailer purchases fuel daily, it must pay for it based on the global market price, regardless of the price at which Orlen originally supplied the fuel to its storage facilities. A retailer's only buffer is the fuel stock held at each station, but this varies depending on location: some stations are supplied once or twice a day, while others receive deliveries once a week.

"That's how simply the global market price is immediately reflected in the fuel batches at stations," said the chairman of the management board of Terminal.

However, if a fuel retailer buys a large volume at once and then sells it over two weeks or one to two months, Vaht said that in a world where even a single statement by U.S. President Donald Trump can cause global fuel prices to rise or fall, no retailer is willing to take such a risk — likening it to sitting on a powder keg.

"To mitigate that risk, hedging instruments are used," Vaht explained. "It works like this: as the owner of the commodity, I hedge against price risk. If the price falls, my financial partner, for example a bank, compensates me for the difference. If I bought at $1,000 and the price drops to $900, I receive $900 from the market, but the bank pays me the remaining $100 per ton."

If the opposite happens — for example, the price rises from $1,000 to $1,100 — the fuel seller must pay $100 per ton to the bank.

"In that sense, there is no real difference between the two purchasing approaches: whether I buy a large quantity and hedge the price risk through a bank or alternatively buy daily and deliver fuel purchased at market price to stations each day," Vaht said.

Ülle Tamme of Neste Eesti confirmed Vaht's explanation, adding that Neste supplies the remaining 30 percent of fuel to the Estonian market.

"Our practice is that the fuel stored in our terminal does not belong to us, but to the parent company. The price is determined at the moment the fuel leaves the terminal — either to stations or into the vehicle that transports it to our customer," Tamme said.

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