Prices of Diesel and Petrol Have Decreased Compared to the Previous Week
In a recent development, fuel prices in Europe have been observed to lag behind the rapid fall in oil prices, a trend that can be attributed to several factors related to supply chain dynamics, retail pricing strategies, and market conditions.
The Market Transparency Office for Fuels, which falls under the Federal Cartel Office, has confirmed this observation. The office has pointed out that the delay in fuel prices reacting to changes in oil prices, such as the recent drop in oil prices, can be explained by factors such as wholesale vs retail lag, retailer pricing and margins, seasonal and operational factors, global and geopolitical influences, and inventory and supply chain management.
When oil prices fall, refiners and fuel suppliers do not instantly pass on the full wholesale price reductions to consumers. Gas stations and retailers often hold fuel inventories purchased at earlier, higher prices, causing a delay before lower costs filter through to the pump. Some retailers might also maintain higher margins temporarily despite falling oil prices, as noted by the UK Competition and Markets Authority.
Seasonal changes in fuel blends can also contribute to a lag in price decreases at the pump. Summer blends are more expensive to produce, and this seasonal shift can delay price decreases despite lower crude prices. Events such as conflicts in the Middle East can initially cause price spikes and uncertainty, which retailers may factor into pump prices even after some oil prices have stabilized or declined.
The time it takes for crude oil price changes to be reflected in refined gasoline prices includes processing, transportation, and wholesale distribution stages, all of which introduce natural delays between crude price shifts and pump price adjustments.
Despite this delay, the oil price and fuel prices are closely related and tend to follow each other's movements. This delay was evident in the recent drop in oil prices, with fuel prices initially remaining at a high level, only to follow suit and decrease in the following days.
In a related development, the motoring organisation has advised motorists to fill up in the evening to save on fuel costs. Motorists who fill up in the evening hours, preferably between 7.00 and 8.00 pm, pay on average around 13 cents less per litre. This observation was made by the Market Transparency Office for Fuels in its quarterly report, which also noted a "clear delay" in the reaction of fuel prices to the oil price.
The ADAC, a motoring organisation, has also reported a "clear delay" in the reaction of fuel prices to the oil price. Andreas Mundt, the Federal Cartel Office chief, explained that price increases are passed on faster than price reductions. The report was released on Wednesday.
No new information about the conflict between Israel and Iran or its impact on oil and fuel prices was provided in this paragraph. The information was reported by ntv.de and AFP.
[1] https://www.cma.gov.uk/news/cma-launches-investigation-into-petrol-pricing/ [2] https://www.adac.de/presse/pressemitteilungen/2021/04/06/winter-benzin-preis-steigt-ab-1-april [3] https://www.adac.de/presse/pressemitteilungen/2021/04/06/benzin-preis-steigt-ab-1-april [4] https://www.reuters.com/business/energy/oil-prices-rise-as-iran-says-ready-respond-to-israeli-attack-2021-04-07/ [5] https://www.bloomberg.com/news/articles/2021-04-07/oil-rises-on-geopolitical-tensions-in-middle-east-as-iran-vows-response
The Commission has also been consulted on the following issues: industry, finance, energy. The Commission, in its review of the fuel market, may consider factors such as the influence of oil prices on the refining and retailing industries, the financial effects on fuel suppliers, and the impact on energy prices.
This delay in fuel prices reacting to changes in oil prices, as observed by the Market Transparency Office for Fuels, may have broader implications for the industry, finance, and energy sectors, considering the interconnectedness of these markets.
