Fuel price: Gasoline and diesel prices are falling, but remain expensive

newsabc March 28, 2022

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Diesel and petrol prices have fallen but remain high

The pain of refueling is slowly decreasing: Diesel and petrol are still expensive, but at the beginning of the week they are sometimes below 2 euros per liter again. Overall, the prices for fuel – after the record highs caused by the war of aggression in Ukraine – have fallen by around 15 percent from the highs. The average price for a liter of diesel fuel in Germany on Monday (March 28) was 2.168 euros, Super E10 cost 2.051 euros and Super E5 was 2.108 euros per liter. And the price of crude oil is still well above the pre-war price. Many are asking themselves: What next for the fuel price?

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“Overall, fuel prices are still far too high,” said an ADAC spokesman recently. Oil prices are well off their peaks; fuel prices usually follow their development. In the course of the Ukraine war, however, they had decoupled: the prices at the gas stations had risen much more sharply than could have been explained by the oil price.

Why the Economics Minister is calling the Cartel Office

Symbolic image fuel price at gas stations

Because the prices for petrol and diesel have not recently followed the falling oil prices, Federal Minister of Economics Robert Habeck (Greens) recently instructed the Federal Cartel Office to examine the situation. The authority should act “if there is any indication of abusive behavior”. The Federal Cartel Office announced that it would examine all market levels.

Currently, however, the “two” before the decimal point on the gas station price boards is a sad fact for drivers. One thing is certain: politicians want to gradually make the internal combustion engine unattractive for climate protection reasons. And electromobility more attractive at the same time – with the innovation bonus, the environmental bonus and the wallbox subsidy, among other things.

A 25 percent price jump for petrol and 38 percent for diesel

At its peak, the price of Super E10 had risen by a good 25 percent since the start of the Ukraine war, and that of diesel by as much as 38 percent. These were the biggest jumps in fuel price history so far. The diesel price is currently around 20 cents below its peak, but fuel is still almost 40 cents more expensive than before the start of the Ukraine war. E10 is almost 15 cents cheaper than at the top, but still almost 30 cents more expensive than before the start of the war.

Crude oil market shaken by war in Ukraine

The current price increase is primarily explained by market distortions as a result of Russia’s war of aggression in Ukraine; the war resulted in sanctions from many countries and shook up the energy market for a long time. The US has already announced that it will no longer import oil or natural gas from Russia. The EU with Germany could follow. In addition, the mineral oil companies are “currently earning a lot” in their refinery business, criticized the ADAC. On Monday, Brent North Sea oil, which is important for Europe, was listed at just under $113, around 15 percent more than before the war.

Why are gas prices so high?

The explanation for the high fuel prices is not only the development of the crude oil price. “The price of petrol has decoupled itself from the price of crude oil and the dollar exchange rate,” according to ADAC. Actually, diesel should be cheaper than petrol, because petrol is taxed much more heavily: almost half of the price per liter ends up with the state, while diesel is around 40 percent.

What about fuel discounts and relief for drivers?

Why diesel is sometimes more expensive than petrol

The reason for the particularly large jump in diesel prices lies in the special behavior of homeowners: Many heating oil users fear delivery bottlenecks due to the war between Russia and Ukraine and fill their tanks despite the beginning of spring – contrary to their usual habits. Also, many oil traders are boycotting Russian oil, causing an artificial shortage in the market. “Diesel from Russia is available on the German market, but it’s hard to sell,” says Dr. Hans Wenck, Managing Director of the Foreign Trade Association for Mineral Oil and Energy. The ADAC fuel market expert, Jürgen Albrecht, assesses the situation as follows: “It is certainly not new that petrol and oil prices are temporarily decoupled from each other. However, it is very rare and has never happened to such an extreme extent as we’re currently watching.”

Do we need to worry about supplies?

ADAC fuel market expert Jürgen Albrecht is not worried about the security of fuel supply in Germany. He sees no signs of it. However, there are no comparable cases. The association en2x also stated that the supply in Germany was secured. There are reserves in accordance with the legally prescribed stockpiling: 90 days for mineral oil and also for the most important products. In addition, oil and oil products could also be traded by sea. However, the latter could lead to higher transport costs.

What happens when Russian oil stops flowing?

In the event that Russian oil and gas deliveries are abruptly ended in the course of the Ukraine war, Federal Minister of Economics Habeck fears panic buying in this country. “What would happen if we said: There is no more oil, we all have to save oil and petrol?” the Green politician asked recently in an ARD interview. There would probably not be less car driving, but there would be a rush to the gas stations – “and everyone is hoarding oil like toilet paper at the beginning of the pandemic”. Habeck would consider an immediate exit from Russia’s energy supplies to be dramatic. Should Russia unilaterally stop its gas supplies, there are emergency plans, said the minister. This also included state-ordered “safety measures” to save energy.

How the oil market developed in 2021

The development is particularly drastic when compared to 2020. At that time, oil and fuel prices had hit lows due to the Corona crisis. Since then, fluctuations have tended to go uphill.

The annual balance sheet for 2021 when refueling was devastating from the driver’s point of view: at the end of the year, Super E10 cost a whopping 38 cents per liter more than in December 2020, with diesel the increase was 42 cents. January was the cheapest month for both types of fuel, while November was the most expensive month. The cheapest tank city in 2021 was Bonn (Super E10: 1.5006 euros; diesel: 1.3627 euros). Drivers paid the most in Wuppertal, just under 60 kilometers as the crow flies (Super E10: 1.5451 euros; Diesel: 1.4017 euros).

Steffen Bock explains the interim low at the end of the year as follows: “The fact that fuel prices fell so significantly in December is mainly due to Omicron, the new, particularly contagious variant of the corona virus. It repeatedly put oil prices under pressure until the end of the month.”

Why were petrol and diesel already expensive in 2021?

But why was 2021 such a bad tank year? “The main driver of fuel prices was the increasing demand for crude oil as the global economy recovered after the lockdown year 2020. In addition, the introduction of the national CO2 price for transport and heating and the increase in VAT to the pre-corona rate of 19 percent had a noticeable effect on the prices at the pumps,” explains Steffen Bock.

How the rising CO2 price affects the price of fuel

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The increased CO2 tax then made petrol 1.4 cents and diesel 1.5 cents more expensive per liter on January 1, 2022. In return, the commuter allowance was raised from 30 to 38 cents per kilometer, but only from the 21st kilometer. Low earners with an income below the basic allowance now also receive a mobility premium of 4.9 cents/km from the 21st kilometer if the travel costs exceed the employee lump sum.

How is the fuel price made up?

A large part of the fuel price are taxes and duties. The energy or mineral oil tax accounts for 65.5 cents per liter for premium petrol and 47 cents for diesel. In theory, diesel should always be around 19 cents cheaper. Due to fluctuating prices in wholesale and special cases such as the Ukraine war, however, things often look different in reality at the gas station.

Added to this is the CO since the beginning of the year₂-Price – 5 cents for Super E10 and a good 6 cents for diesel. The rest is divided into the price of crude oil and the costs of further processing, transport, filling stations and the profit of the mineral oil industry. And on top of that there is VAT of 19 percent.

Petrol and diesel permanently above two euros?

If you leave out temporary drivers like Putin’s invasion of Ukraine, a fuel price of two euros is rather unlikely in the long term. If the dollar exchange rate remained constant, the price of oil would have to remain well above 100 dollars. The oil producers’ association Opec+ has little interest in further rising prices. In addition, this would make the extraction method fracking more attractive. And that puts pressure on the prices again because the supply increases. OPEC can have no interest in that.

Conversely, it can be assumed that prices will fall again slightly as soon as the Russian oil boycott ends. When that will be is not foreseeable due to the ongoing fighting in Ukraine.

How can drivers save money when filling up?

In the border area of Poland and the Czech Republic, a trip to the neighboring country may be worthwhile. And when travelling, you should definitely avoid motorway service stations. (Valuable tips for saving fuel)