Middle East easing causes persisting high fuel prices, according to ADAC
European Diesel Prices Remain High Despite Falling Oil Prices
In a recent report, ADAC, a well-known German automobile association, has stated that the prices for diesel and super gasoline have not decreased significantly in Europe, despite a drop in crude oil prices.
On Sunday, the average price of diesel nationwide, as reported by ADAC, was 1.616 euros per liter, which is 7.8 cents more than on June 12, the day before the attacks began in the Middle East. Super gasoline, meanwhile, had an average price of 1.688 euros per liter, a mere three cents increase compared to June 12.
Despite these increases, super gasoline prices are closer to their pre-crisis level compared to diesel. The price of diesel fuel has increased more in recent weeks, according to ADAC.
There are several factors contributing to this discrepancy. European countries impose substantial taxes and environmental levies on diesel fuels to discourage fossil fuel use and fund infrastructure and environmental initiatives. These fixed or minimum tax levels cushion retail diesel prices from crude oil price drops.
Refining costs, transportation, storage, and distribution expenses also remain relatively stable or might increase due to inflation or logistical disruptions. These costs form a significant portion of retail diesel prices.
The ongoing geopolitical tensions, supply chain constraints, and energy market volatility in Europe following events like the Russia-Ukraine war have sustained pressures on fuel prices beyond crude oil cost alone. Local market regulations, subsidies, currency fluctuations, and demand patterns also influence fuel prices differently from global oil prices.
In sum, while crude oil is a critical input, diesel retail prices reflect a mix of taxation, infrastructure, environmental policies, and regional market dynamics that blunt the immediate impact of falling oil prices on pump prices in Europe.
ADAC has reported that diesel prices should still decrease, and they are expected to do so more significantly than gasoline in the near future. The drop in oil prices following the easing of tensions in the Middle East has not fully reached gas stations, but the strengthening euro against the US dollar is a contributing factor to the potential decrease in fuel prices.
It's important to note that there can be significant differences in fuel prices depending on the region and time of day. In particular, gasoline and diesel are usually significantly more expensive in the morning than in the evening.
Despite the oil price in euros having returned to its pre-crisis level, diesel prices remain significantly higher. The potential for further decreases in fuel prices is due to the significant drop in oil prices and the strengthening euro against the US dollar.
- The high diesel prices in Europe, despite falling oil prices, can be attributed to the substantial taxes and environmental levies imposed on diesel fuels, which create a cushion for retail diesel prices.
- In the energy sector, refining costs, transportation, storage, and distribution expenses contribute to the relatively stable or increasing retail diesel prices, whereas super gasoline prices are relatively closer to their pre-crisis level compared to diesel.
