A year ago, fuel prices shocked motorists, now they are acting as a brake on inflation in this country – simply because the situation has normalized somewhat. Is it going further down now?
Significantly more than two euros per liter of fuel – what motorists had long considered a horror vision became reality a year ago. A year later, fuel prices have partially normalized again, and that alone should even act as a brake on inflation in the coming months. Because what is currently paid at the pumps is still expensive in a long-term comparison. Compared to the values from a year ago, it almost seems like a bargain.
In March 2022, under the impact of the Ukraine war, all previous fuel price records were pulverized. According to figures from the ADAC, on March 7th last year, the value of 2 euros per liter of Super E10 and diesel was exceeded for the very first time on a nationwide daily average. On March 10th, diesel reached its all-time high of EUR 2.321 per liter on a national daily average. The E10 record was reached on March 14 with 2.203 euros.
Prices are currently well below that. In February, both premium E10 petrol and diesel cost 1.754 euros per liter on a nationwide monthly average, as determined by the ADAC. Should prices be similar in March, diesel would be around 18 percent cheaper and premium petrol almost 15 percent cheaper than in the same month last year. That would be so clear that it would even be reflected in the inflation rate. After the recently introduced new weighting of the consumer price index, in which fuel prices make up around 3 percent, there is a calculated dampening effect of almost half a percentage point.
Gradual normalization
In the case of petrol, prices have gradually normalized since the fall, says ADAC fuel market expert Jürgen Albrecht. If you compare them with the oil price and the euro exchange rate, they are still rather high. “But the decoupling with extreme prices is over.” However, diesel is not that far along, even if the fuel has been cheaper than petrol at least since mid-February.
On Sunday, according to ADAC, the E10 cost 1.778 euros per liter, diesel 1.757 euros. That’s a slight increase over the past few days, but fluctuations are not uncommon and overall Albrecht expects both types of fuel to trend downwards. “Unlike in parts of last year, fuel prices are again more closely linked to the price of oil,” he says. “I don’t think it’s very likely that it will rise sharply. If the competitive forces take effect and nothing out of the ordinary happens, fuel could become cheaper in the next few months.”
Albrecht sees room for improvement, especially when it comes to diesel. Because the tax on fuel is significantly lower than on petrol, which is why diesel is usually significantly cheaper. On average from 2012 to 2021, diesel was a good 15 cents cheaper than E10 – not just 2.1 cents like on Sunday. And with the end of the heating period, there is another effect: if the demand for heating oil falls in the spring, this often also depresses the price of diesel.
Further development difficult to predict
However, price reductions would have to be forced through competition, emphasizes Albrecht and calls for consciously cheap refueling. “The mineral oil companies will not give up their margins voluntarily.” It also plays a role that consumers are now used to high prices to some extent. A year and a half ago, the fuel prices currently perceived as normalization would have been clear highs. It is difficult to predict how fuel prices will continue in the second half of the year. It should depend primarily on the oil price – as in the past.
Despite the high prices, no less fuel was consumed in 2022 than in previous years. The annual figures for fuel deliveries recently reported by the Federal Office of Economics and Export Control (BAFA) even show an increase for petrol compared to the pandemic years 2020 and 2021. The level for diesel is largely unchanged. In the case of petrol in particular, the consequences of the relaxation of the corona virus and increased travel have evidently more than offset the effects of the high prices. Before Corona, however, the consumption of both fuels was significantly higher.
Source: Stern
