Michal rules out a quick fuel excise cut: what it means for your fuel spending

What happened and when

ERR wrote on 28 September 2026 that Prime Minister Kristen Michal took a softer stance on cutting fuel excise duties than Finance Minister Jürgen Ligi did, speaking on the show "Stuudios on peaminister." According to Michal, the government is watching the excise policies of neighboring countries, especially Latvia and Sweden, but he named the fuel supply side and the Strait of Hormuz crisis as the main issue, not Estonia's own tax rate.

A week earlier, organizations from the transport, logistics and fuel sectors appealed to the government to cut the diesel excise duty immediately to the EU minimum level, warning that some excise revenue could otherwise shift to Latvia. Ligi refused to lower the duty, and Michal confirmed that any excise relief could only happen by cutting some other expense, since the budget deficit needs to shrink.

What this means for drivers

Since the excise duty won't change any time soon, diesel prices should stay roughly at their current level in the coming months, unless other factors like oil prices or geopolitics push them around. In other words, when planning your fuel budget, don't count on a cut, but rather expect a price that is stable or fluctuating based on the international market rather than Estonian tax policy.

This matters to anyone who drives to work daily or uses a car for business: when forecasting fuel costs, it's best to base your estimate on today's price level rather than wait for a reduction.

A worked example with fuel costs

Suppose a car uses on average 6 liters of fuel per 100 kilometers, and someone drives 1200 kilometers a month commuting to work and back. That works out to 72 liters of fuel a month (6 liters times 12, since 1200 km equals twelve 100 km segments). If the price per liter is, say, 1.50 euros (a net price of 1.21 euros plus VAT, calculated as net price times 1.24, i.e. 1.21 × 1.24 = 1.5004, rounded to 1.50 euros), the monthly cost is 72 × 1.50 = 108 euros.

If the excise duty or price were to change in the future, for example dropping by 5 cents per liter, in this same example the monthly cost would fall by 72 × 0.05 = 3.60 euros, bringing the new monthly cost to 104.40 euros. To get an exact, personalized calculation where you can enter your own car's fuel consumption, kilometers driven and price per liter, it's worth using the fuel cost calculator. If you want to understand how much of the price per liter is VAT, the VAT calculator can help clarify that.

Why the excise cut isn't happening right now

According to Michal's explanation, the state budget is currently in a constrained position where the deficit needs to shrink rather than grow through new spending or revenue cuts without a funding source. He pointed out that the government has already carried out extensive layoffs, including at the Unemployment Insurance Fund and the Land and Spatial Development Board, and that funds for a payroll increase were found for only four priority groups: teachers, cultural workers, rescue workers and police officers, at a rate of three percent.

This means any potential excise relief would have to come at the expense of cutting some other cost or raising some other revenue. The government has not made such a decision yet, and is instead watching how steps taken by neighboring countries, such as Sweden and soon-to-vote Latvia, affect fuel prices and excise revenue.

What to watch next

The topic of fuel prices and excise duty directly affects everyone who drives to work, hauls goods, or has to account for transport costs in their business. Since the government has promised to watch what neighboring countries, especially Latvia, do next, it's worth following Latvia's and Lithuania's excise decisions too, as they could influence whether the Estonian government changes its position in the coming months.

• The diesel excise duty is not being cut right now, so price expectations should be based on the current market price
• To forecast your fuel costs, use your car's actual consumption rate and the kilometers you actually drive
• Watch Latvia's and Sweden's excise decisions, as they could influence the Estonian government's next steps
• Budget constraints mean any tax relief needs a funding source found elsewhere