Fuel price increase has not yet broadly reached the economy
According to Statistics Estonia, inflation in Estonia stood at 3.3 percent in March, with the rise driven mainly by higher fuel prices. However, SEB analyst Mihkel Nestor says that the price increase has not yet broadly spread across the economy.
Statistics Estonia reported that, according to a preliminary estimate, inflation in March was 3.3 percent. This is still higher than the euro area average of 2.5 percent, but Estonia was not among the very highest.
According to Lauri Veski, head of the consumer price statistics service at Statistics Estonia, the index was most strongly affected by rising fuel prices.
"Compared with a year ago, food and alcoholic beverages are also more expensive, and they have a large weight in the consumer price index basket," Veski said.
A rate of 3.3 percent does not seem dramatic, considering that as recently as November last year we saw price growth of 4.7 percent.
While the pace of price increases slowed in recent months, according to the Bank of Estonia's forecast, inflation is likely to pick up again.
According to SEB analyst Mihkel Nestor, the impact of higher oil prices has not yet broadly filtered through the economy.
"Today, companies have not yet started to adjust their prices in other sectors due to rising input costs," Nestor said.
Because no one knows whether the Strait of Hormuz will reopen soon, experts have both optimistic and pessimistic scenarios. In a month's time, reserves will start to run out.
"If April remains at the same level and a solution is found, then we will see these high prices for another two to three months, until reserves are replenished," Nestor said, adding: "If the view were that the Strait of Hormuz is closed for a longer period, then we would be talking about an oil price that is at least 50 percent higher compared to today."
According to Tarmo Kärsna, head of business development at Estonian fuel retail company Alexela, forecasts for oil prices suggest that the ceiling could be around $150 per barrel. At the same time, there are also those who say that $200 per barrel is not impossible.
"If we think about what that would mean for fuel stations, then we really could see diesel prices at €2.50 and perhaps even higher," Kärsna said.
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Editor: Märten Hallismaa, Argo Ideon
