by Rafael Seidl
Germany’s automobile association ADAC reports that this past weekend, drivers in that country faced gasoline prices of €1.41 per liter (US$7.10 per gallon). This is just €0.03 below the historic high reached after hurricane Katrina.
The recent rise in the price of oil does not, in ADAC’s view, justify such increases in prices at the pump. A spokesperson suggested there was room for discounts, implying that refineries have increased their margins ahead of the summer driving season.
In addition, chronic refinery capacity shortfall in the US means that country has to import large quantities of finished gasoline and blending products on the spot market in Rotterdam, mostly supplied by European refineries. For reference, the EIA estimates that roughly 1 in every 8 gallons consumed in the US is imported. Refinery capacity is expanding in the US, but more slowly than demand is growing. Thus, the problem is actually getting worse each year.
Analyst Michael Braeuniger of the World Economic Institute in Hamburg expects prices at German pumps may go as high as €1.60 per liter (US$8.15 per gallon) this summer. He blames a combination of a sales tax hike earlier in the year and continued robust growth in the global economy.
In Switzerland, Austria and Poland, gasoline prices currently range from €1.00 to €1.13. The difference is due mostly to national fuel tax rates. The EU can harmonize these only very slowly because any change requires the unanimous consent of all 27 member states. ADAC therefore expects an increase in fuel tourism, which skews tax revenues, CO2 emissions statistics and the associated trade in certificates and also generates additional CO2 emissions.
If prices at the pump continue rising, will European consumers force their government to intervene in the spot market to drive prices down in Europe and up in the US?