Fuel prices drop significantly

style="float: right; margin-bottom: 10px; font-weight: 600;"Thu 17th Mar, 2022

For the first time since the highs of the past few days, fuel prices have dropped significantly. The price of diesel fell by 4.2 cents per liter within one day, and Super E10 was 3.3 cents cheaper. According to the German Automobile Association (ADAC) on Thursday, the daily average price for diesel throughout Germany was 2.25 euros per liter on Wednesday. For Super E10, it was 2.159 euros. According to the transport club, there were also signs of a further, albeit slower, decline on Thursday.

Compared to the situation before the start of the Ukraine war, diesel is thus still just under 59 cents per liter more expensive, E10 just under 41 cents, while the price of crude oil, which had risen sharply in the meantime, was recently relatively close to its pre-war value again. The ADAC still considers fuel prices to be too high. The current decline must continue, it says.

Meanwhile, the fuel subsidy proposed by Finance Minister Christian Lindner (FDP) has met with criticism from economists. It is not the right instrument, Clemens Fuest, president of the Munich-based Ifo Institute, told the Rheinische Post newspaper (Thursday). "Relief should not be given with a watering can, but should be targeted."

The "Wirtschaftsweise" Veronika Grimm emphasized: "The discussion about fuel discounts is completely out of time. We need to relieve the burden on lower and middle incomes. However, fuel rebates relieve high-income earners more because they own more cars and drive further distances." Fuest also spoke of a "redistribution from the bottom to the top" in this context.

Grimm also said that we need "the dampening effect of high prices on demand so that we do not face even greater challenges than we already do in the event of a shortage of fossil fuels." Relief would have to be targeted. "Conceivable would be an energy allowance that recipients would have to declare as income. Then it would be repaid to a greater extent by recipients of high incomes. Energy efficiency programs could also help."

Lindner had brought a temporary state fuel subsidy into play. He wants to push the price of gasoline to below two euros per liter of diesel or gasoline. The concrete form this would take is still open. He considers the energy subsidy called for by the Greens to be unsuitable.

The Ifo Institute does not consider continued high gasoline and diesel prices to be a rarity, despite a significant drop in crude oil prices. If market demand remains high, high prices could stabilize, "for example, because buyers expect even higher prices in the future," Ifo energy expert Karen Pittel told the Augsburger Allgemeine newspaper (Thursday). "Basically, we are observing this to some extent just in terms of demand for heating oil and diesel." The fact that gasoline and diesel prices react asymmetrically to rising and falling prices for crude oil is not a new phenomenon, she said.

ADAC's fuel market expert, Jürgen Albrecht, partially disagrees: "It is certainly not new that gasoline and oil prices temporarily decouple from each other. However, it is very rare and has never happened to such an extreme degree as we are currently observing," he told the Deutsche Presse-Agentur. "In the case of diesel, because of its similarity to heating oil, this occurs more frequently depending on the season - although here, too, not as strongly as at present."

Image by Alexander Fox

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