The price of gasoline can still go down before the drastic increases

The year 2024 brought relief to the wallets of gasoline and diesel drivers. According to Statistics Finland, the average prices of 95-octane and 98-octane gasoline fell by more than six percent and the price of diesel by more than nine percent compared to a year ago.

In 2024, the average price of 95 gasoline was 1.83 euros and diesel 1.79 euros per liter.

The difference in prices is clear when you compare to 2022, when Russia attacked Ukraine. At that time, the average price of gasoline was 2.13 euros and the average price of diesel was 2.15 euros per liter.

Fuel prices have fallen around the world recently. Lower pump prices are influenced by many factors, one of which is the drop in the price of crude oil.

The price of a barrel of Brent crude oil dropped to $120 in the summer of 2022. This week the price hovered below $75. So more than a third of the peak price of crude oil has melted away.

In Finland, the price has been lowered by the governments’ decisions to loosen the fuel distribution obligation. The share of renewable fuels in the fuel sold was calculated during the previous government. The level rose slightly in 2023. The current government kept the distribution obligation unchanged in 2024.

The government also lowered the fuel tax for 2024. The effect is canceled out by the fact that the government decided to increase the general value added tax, which raises the price.

Now the distribution obligation has started to rise again. From the beginning of this year, the level rose to 16.5 percent. The rise will continue in the coming years.

According to the bill’s estimate, the increase in the distribution obligation will increase fuel sales prices by eight cents for diesel and two cents for 95 gasoline per liter.

A more drastic increase is coming from the emission trading of fossil fuel distribution. The government decided to join the new emissions trading as soon as it starts in 2027.

There is uncertainty about the magnitude of the price effect. According to the Commission’s estimates, using a price of 50 euros for emission rights, the effect would be 11–16 cents per liter, depending on the fuel.

According to the estimate of the Confederation of Finnish Industry, this threatens to raise the costs of transport in Finland by more than one billion euros annually.

By 2030, the price of gasoline could according to calculations increase by 54 cents and the price of diesel by 37 cents per liter (KL 10.12.2024).

Through regulation, there is upward pressure on fuel prices, when new climate taxes are imposed on internal combustion engine drivers.

For this year, prices are under pressure in the other direction as well. If global economic growth does not start to pick up, the price of crude oil may come down.

It is difficult for the Opec organization of oil producers to make further cuts in production. The capacity built as a result of the previous price shock must enter the market at some point.

The price of gasoline may remain moderate this year, but for a bad reason.