What's behind rising gas prices in Germany? – DW – 03/20/2022 (2024)

Renowned for its sleek cars, Germany has been stunned in recent weeks by skyrocketing fuel prices — motorists have to shell out €2.13 for a liter of gasoline ($8.92per US gallon) at the pump. The news is even direr for diesel, which at €2.25 per liter ($9.43per US gallon) is more expensive than gasoline for the first time in history despite government subsidies.

In Germany, record-highfuel prices are currently the most visible falloutof Russia's invasion of Ukraine.

"There is, of course, considerable uncertainty about the amount of oil that might be available in the next few days or weeks," Jens Boysen-Hogrefe of the Kiel Institute for the World Economy told DW. "That is causing suppliers to stock up at high prices."

As a result, fuel prices are also rising. But something seems to be amiss.

Shortly before the war began, the price of Brent crude oil was €85 per barrel; after more than a week, it reached a high of €115. As of March 17, a barrel cost just under €96. Converted to the liter, the price difference to the pre-war period amounted to €0.03.

Meanwhile, the price of fuel continues to send shockwaves at the gas pump with €2.25 euros for a liter of diesel, which is €0.55 more than three weeks ago. How does this calculation work? And who pockets the large difference between crude oil and fuel prices?

Decoding the price of gas

The money that motorists pay for refueling is distributed among several parties — oil companies, suppliers, refineries, gas pumps and the state.

The actual cost of the product makes up more than half of the price. That involves the procurement price for crude oil as well as the costs for transport, further processing, storage, administration and distribution. Add to this the CO2 taxes paid by the oil companies and their profits.

The government tax office also takes a big bite out of refueling — taxes account for around 39% of the fuel bill for diesel, and 48% for gasoline. But it is unlikely that the state also profits from high fuel prices.

This is because the energy tax rate is fixed and doesn't fluctuate with the fuel price. For diesel, it is 47.04 cents, for gasoline 65.45 cents per liter.

The value-added tax is calculated as a percentage, but it is very likely that the higher amounts shelled out by motorists at the gas pump will be missed elsewhere, Boysen-Hogrefe says.

"Maybe one or two people will deny themselves a visit to a restaurant, which in the end means the restaurant owner won't pay income tax and value-added taxes on it."

Gas pump owners also don't seem to be benefiting from high fuel prices.

"Margins are relatively tight there," Boysen-Hogrefe says, adding that they likely sell less because higher fuel prices could mean fewer customers willing the purchase an extra candy bar. "In that respect, high fuel prices are actually not good news for gas pumps."

Geopolitical uncertainty drives up prices

Germany imports almost all the crude oil it needs and 41% of ready-to-use diesel. Does Russia stand to gain as a result?

"We have Mr. Putin to thank for the high prices, of course," says energy economist Manuel Frondel of the RWI Leibniz Institute for Economic Research, adding that Russia, however, is less likely to benefit from Germany's high fuel imports.

"There are long-term contracts with Russia, according to which all deliveries are paid for at the prices set in these contracts," Frondel says.

That leaves the refineries when it comes to the search for who pockets the discrepancy between crude oil and fuel prices. German economist Justus Haucap thinks they could be the reason for the surging gasoline and diesel prices.

"Whether one can already assume an abuse of market power by the refineries, I am not yet able to say so ad hoc," he wrote in a tweet in German. He said it could not be ruled out, but there were other possible reasons. It is possible that the refineries are expecting an import ban on oil and diesel from Russia in the near future, he added.

Alexander von Gersdorff, thespokesman for the Fuels and Energy Business Association, says the scarcity of petroleum products explains the decoupling of fuel prices from oil prices.

"The petroleum companies (...) are successively reducing their imports of oil and also diesel from Russia —on their own initiative, without sanctions," he wrote in response to a question from DW. A third of diesel imports in Germany comes from Russia.

"It is because of the geopolitical uncertainty that product prices have risen and remained so high, although the price of Brent North Sea oil has already fallen again," von Gersdorff said.

Could sanctions against Putin cripple the global economy?

Justus Haucap further speculates: "Refineries may already be tightening supply today if necessary (by raising prices) and filling up barrels in case of an embargo."

Are refineries abusing their power? The Federal Cartel Office is currently investigating that question, on the orders of the German economyminister.

This article was translated from German.

What's behind rising gas prices in Germany? – DW – 03/20/2022 (2024)

FAQs

Why did gas prices go up in Germany? ›

The government implemented the VAT reduction on natural gas deliveries and district heating from 19 to 7 percent in October 2022 following the gas price jump that resulted from Russia's war in Ukraine.

How much is gas in Germany in US dollars? ›

ActualPreviousUnit
1.972.02USD/Liter

Why did gas prices suddenly go up? ›

Underlying the higher costs of gas are routine factors including refinery maintenance, the switch to summer gasoline and rising demand. Domestic supply is also impacted as refineries take advantage of milder weather conditions to do necessary maintenance.

How much does 1 gallon of gas cost in Germany? ›

Germany
Fuel TypePer GallonPer Liter
Super$4.399$1.162
Super Plus$4.753$1.256
Diesel$4.222$1.115
1 more row

Why is German gas so expensive? ›

The price of fuel at the pump is heavily influenced by the price of crude oil on the international markets. This volatile asset can swerve between high and low prices depending on the time of year, the political landscape and the levels of supply and demand.

Why are gas prices so high in Europe? ›

In Europe's tight market, traders are “hypersensitive,” says Jack Sharples, senior research fellow at the Oxford Institute of Energy Studies, who notes that some of the bloc's biggest suppliers of piped gas such as Norway, Azerbaijan and Algeria don't have much spare capacity.

Is gas cheaper in USA or Europe? ›

Gas prices in the U.S. are often much less expensive than those in European countries like Iceland and Monaco. July 24, 2023, at 12:38 p.m. OPEC+ announced last spring its plans to cut oil output. When or if that happens, world oil prices would likely skyrocket and gasoline prices would follow suit.

Which country has the highest gas prices? ›

Global premium gasoline prices 2024, by select country

Hong Kong had the highest prices for premium gasoline (95-RON) on April 15, 2024. That day, prices averaged more than three U.S. dollars per liter, which was notably more than in any other country.

Which country has the cheapest gas? ›

Using data from globalpetrolprices.com, these are the top ten nations with the cheapest gasoline per US gallon as of 29 October, 2023.
  • Iran, $0.108.
  • Libya, $0.118.
  • Venezuela, $0.132.
  • Algeria, $1.268.
  • Kuwait, $1.285.
  • Angola, $1.369.
  • Egypt, $1.409.
  • Turkmenistan, $1.625.
Oct 29, 2023

Who controls gas prices in the USA? ›

Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.

How much will gas be in 5 years? ›

Long-term Gas price prediction for 2025, 2026, 2027, 2028, 2029 and 2030
YearYearly LowYearly High
2025$ 2.03$ 3.81
2026$ 1.757616$ 2.30
2027$ 1.740678$ 1.972411
2028$ 1.392031$ 4.09
2 more rows

Why is there a gas shortage in 2024? ›

EIA projected dry gas production will ease from a record 103.79 billion cubic feet per day (bcfd) in 2023 to 102.99 bcfd in 2024 as several producers reduce drilling activities after gas prices fell to a 3-1/2-year low in February and March.

What are gas prices in Germany right now? ›

European Fuel Prices
CountryGasoline (Euro 95)Diesel
EUREUR
Germany1.7741.671
Greece1.8931.656
Hungary1.5331.578
39 more rows
7 days ago

Is gas cheaper in Canada or the USA? ›

Gas prices at the pump are typically lower in the US because of the difference in taxes.

How much is gas in Russia? ›

Company Matches
NationCityPrice in USD Regular/Gallon
RussiaMoscow$2.10
Puerto RicoSan Juan$1.74
Saudi ArabiaRiyadh$0.91
KuwaitKuwait City$0.78
32 more rows

Why are German energy prices so high? ›

Electricity price components

The ensuing trade conflict between Russia and other European nations led to a shortage of fossil fuels in the EU, causing prices for electricity to shoot up - especially in Germany, where gas plants still account for a substantial part of electricity generation.

What is the gas price cap in Germany? ›

Gas, heat and electricity price brake 2023

This cap (gas at 12 cents per kilowatt hour, district heating at 9.5 cents per kilowatt hour, electricity at 40 cents per kilowatt hour) affected consumer prices if the regional energy prices for gas, district heating and electricity were above this cap.

What is Germany's gas policy? ›

1. Germany is seeking to maintain the low growth rate of domestic gas consumption. To this end, the CDU/CSU/SPD government decided in June 2008 to implement an ambitious programme to limit energy consumption in the German economy, by mo- dernising public and private buildings, among other measures.

How much is natural gas in Germany right now? ›

Germany Natural Gas Border Price is at a current level of 10.11, up from 9.130 last month and up from 9.97 one year ago. This is a change of 10.73% from last month and 1.40% from one year ago.

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