How the fuel discount became a bone of contention

By Christian Küchen
Christian Küchen is Chief Executive Officer of the fuels and energy business association en2x.

For a month, from mid-May to mid-June, the discussion about the so-called fuel rebate kept large parts of Germany on tenterhooks. What had happened?

Here is a brief recap: With the end of many Covid lockdowns and then again with the start of the Ukraine war, prices for gasoline and diesel had risen significantly around the world and thus also in Germany. As a result, taxes on fuel were lowered in many countries – first in Poland, followed by Italy, France, the UK, the Czech Republic and finally Germany: The German parliament passed a fuel rebate on gasoline and diesel for three months from June to the end of August.

EU embargo against Russia

Anticipation was high, but in mid-May of all times, a perfect storm hit the international mineral oil markets. The reasons ranged from the EU’s embargo decision against Russia to a sharp rise in spring gasoline demand in the USA. At the same time, refinery outages in North America and Europe – due to maintenance, unforeseen plant malfunctions and logistics bottlenecks – led to lower fuel production.

As a result, product prices rose worldwide and, with them, gas station prices. In the USA, motorists paid more than $5 per gallon for the first time. In Germany, the price of a liter of Super E10 rose by 16 cents in May, while diesel increased by 6 cents within a week at the end of the month.

Fuel tourism from Denmark and Benelux

Many observers thought that this development was unique to Germany and suspected a connection with the fuel rebate. However, a glance at neighboring EU countries would have shown that the price increase was not a German phenomenon. The massive increase in fuel tourism from Denmark, Belgium, Luxembourg and the Netherlands to Germany at the beginning of June could also have changed this perception, but mainly received increased attention in the border regions.

The fuel rebate was thus well received by customers – and it came at just the right time, when fuel prices were on the rise around the world. Instead, it was not perceived as a relief in many cases. There was a suspicion that the industry was keeping part of the energy tax cut.

Refineries closed in many countries

What was the cause of this perception? First and foremost, by comparing gas station prices with crude oil prices – which have not risen as sharply – and concluding that the fuel discount does not fully benefit the customer. But in fact, consumer prices follow world market prices for gasoline and diesel – and not crude oil prices. In the past, this important difference was often overlooked because sufficient refinery capacity was available and enough products could always be made from crude oil.

This situation changed fundamentally at the latest with the outbreak of the Ukraine war: It is not crude oil on the world market that is in short supply, but gasoline and diesel at the gas pump. One reason: During the Covid pandemic, refineries had been closed in many countries. When demand picked up again, these capacities were missing. As a result, fuel prices decoupled from the oil price. This decoupling was most recently accelerated by the EU import embargo against Russia.

It’s not just about crude oil: All EU member states combined have imported an average of around 20 million tons of diesel per year from Russia in recent years. So the fuel produced in refineries there also has to be replaced – further exacerbating the product shortage.

Green hydrogen needs investment

It is indisputable that many of our fuel refineries are earning more money with higher product prices than the long-term average, despite the significant increase in energy costs. However, it is equally indisputable that these refineries have incurred losses, in some cases heavy ones, in recent years due to the Covid-induced slump in demand. This has to be kept in mind when discussing “excess profits“.

Refineries are now facing investments in the billions to switch from fossil energy to carbon neutrality. They are predestined to enter large-scale green hydrogen production. However, such risky investments are not becoming more likely when there is a perceived risk that future profits may be siphoned off, sanctioning market-based outcomes. At the end of August, the fuel rebate in Germany will expire. It is foreseeable that there will once again be considerable discussion about local gasoline and diesel prices. But even then, the same applies in Germany as elsewhere: Consumer prices depend fundamentally on the global market prices.


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