World market oil prices have fallen for some time, but experts say there is little reason for optimism and consumers should expect higher fuel prices to persist for an extended period.
Since mid-May, oil prices on world markets have been edging downward, even though the crisis in the Middle East remains unresolved. Experts say optimism in the fuel market is being buoyed by messages from U.S. President Donald Trump.
“After record highs in early April, world market prices have come down — by €0.53 per liter for diesel and €0.08 per liter for gasoline — but both gasoline and diesel remain €0.25 per liter more expensive than before the war,” said Alan Vaht, a member of the management board of fuel retailer Terminal.
Vaht said that even if an agreement is reached in the Middle East, repairing fuel infrastructure and rebuilding fuel reserves will take time, meaning higher fuel prices are likely to persist for an extended period.
“Globally, our problem is not the availability of crude oil. The problem is refined products. Brent crude may cost $80–90 per barrel, but prices for refined products remain elevated, and that is the issue,” Vaht said.
“The main reason is that Asia relied on crude oil from the Persian Gulf, refined it into finished products and there is now a shortage of those products on the market,” he added.
Jet fuel prices have also retreated from their peak, but they remain about 60 percent higher than before the Middle East crisis began. The increase is also reflected in the cost of summer vacation flights.
“There are still some cheap offers available, but compared with last year’s average, travelers should realistically expect to pay an additional €40–50 this summer,” aviation expert Sven Kukemelk said.
A key moment will come in the fall and winter when airlines would normally try to attract passengers with low-cost fares. With fuel prices this high, however, that is no longer feasible. Airlines operating aircraft with fewer than 100 seats are facing particularly difficult conditions.
“For our market, it would be extremely important to have many small aircraft, regional aircraft, because that would provide a large number of connections. At the same time, today’s rise in fuel prices is hitting exactly those regional airports the hardest,” Kukemelk said.
Rising fuel prices have also led people in Estonia to seek more affordable ways to travel, including replacing car trips with bus travel.
“In April, we saw passenger numbers increase by nearly 10 percent compared with the same month last year. That has allowed us to keep ticket prices at a reasonable level,” said Ingmar Roos, CEO of coach operator Lux Express.
“I made a comparison, and compared with April of last year, the average ticket price on Lux Express’s Estonian routes has increased by 1.2 percent,” he added.
Bus fares have increased by only €1 for the company’s more luxurious seats, although a seasonal fare increase during the summer is unavoidable.
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