Fuel. Why the drop in oil prices does not benefit drivers

Drivers are counting the days. Prices are down 12 cents at the pump this Thursday. It is actually 1er In September, government concessions should be raised from 18 cents to 30 cents, according to a decree published last Tuesday. The temporary reprieve is probably not enough for motorists hoping that the rise in oil prices will subside by the end of the year. Economists interviewed are careful not to predict the sequence of events.

Russian oil embargo

Surely,” An increase in oil supplies associated with an increase in OPEC production (mainly to Riyadh) and an increase in US exports using their stocks have the effect of reducing pressure on prices.“, analyzes Valerie Mignon, scientific advisor of the French Center for Research and Studies on the International Economy (Cepii).

The same is true on the demand side because ” concerns about slowing global growth, and particularly China, the world’s second largest oil consumer», lowers prices. But until when? The decision to impose an embargo on more than 90% of Russian oil imported into Europe by the end of the year may again strain the market.

The price of Brent oil is far from the record of 2008

Commuters’ worries are compounded because this summer, fuel prices have fallen less rapidly than oil prices, despite the fall in Brent oil prices. Last week, diesel prices even stopped falling to continue their gains (see infographic).

So, for six months, the price of a liter before the start of the war unleaded 95 stabilized at around €1.80 per liter at the pump. Moreover, this same rate, deducted from public assistance, has actually increased by 18 cents, and is still well above its pre-war level.

In 2008, a record year for Brent prices, diesel was under €1.50 at the pump…

for diesel, The assault on the wallet, including government rebates, is even greater as diesel hit €1.95 on August 25, up from €1.71 six months ago. If there was a direct correlation between the price of crude oil and the price of fuel, petrol or diesel should have cost back to what it was in February this year.

Even at its peak, the price of Brent oil did not exceed or come close to the 2008 record of $147.50. However, at the time, diesel at the pump was below €1.50, and SP95 gasoline was just over €1.60… Why oil to understand that, tankers are exploding in profits and motorists are toast, you need to break down the price of a liter of diesel or gasoline at the pump.

Distributors: do not want to sell at a lower price

“Price increases at the pump are almost automatic. In the other direction, the transmission of the price of the barrel is less sensitive., notes Valerie Mignon. There are two main explanations for this: “The first one comes from distributors. In the event of an increase in prices – due to the weakness of their margins – the latter cannot keep their prices constant, because they will suffer a huge loss “explains this expert of the sector.

On the contrary “Distributors can be strategic by playing on consumer ignorance and delaying the impact of falling crude oil prices on prices at the pump.”. So it will take about three weeks for a downward shift in wholesale prices to be reflected at the pump, according to research by the Banque de France.

Another explanation is ” related to inventory adjustment costs“. So, ” when the price of a barrel decreases, the demand for fuel increases, which affects the reduction of reserves during the period of production regulation. Since unloading is costly, the decline observed in prices at the pump is only partial compared to the price per barrel, as prices at the pump must take into account the cost of unloading.“.

Depreciation of the euro increases prices

Another factor may explain this difference in the curve. Exchanges in the crude oil market are not in euros, but in dollars. gold, “The depreciation of the euro against the dollar (16% in one year – editor’s note) resulted in the price of fuel denominated in euros falling less than the price of a barrel denominated in dollars”Jamal Bouoiyour, an economist at the University of Pau, a specialist in energy issues, notes.

For example, in 2008, 1 euro was exchanged for 1.60 dollars. Today, one euro equals one dollar. This depreciation partly reflects the strong appreciation of the dollar, as the euro holds up better against other currencies. But this new exchange rate difference adds up to inflation for the motorist.

Refinery margins explode

It is another major factor that determines the price. It is the cost of converting crude oil into gasoline and diesel that is called the cost of processing. “The war in Ukraine and sanctions against Russia caused these margins to explode”Valerie Mignon explains.

Why? According to Cepii, 25% of our diesel imports come from Russia. “Sanctions against Russia have caused a sharp decrease in imports from this country. This loss of Russian processing power has not been offset by other potential elsewhere, a sector that was in short supply long before the conflict began. This is due to oil companies not investing in their capabilities e processing and tensions maintained in the processing market by the same companies. »

For example, between 2010 and 2020, the number of processing sites worldwide decreased by 13%.“There are only six refineries left in France – three operated by Total, two by Esso and one by Petroineos.”list, in turn, Jamal Bouoiyour.“The lack of this potential has led to an increase in fuel prices and an explosion in margins. In January, it increased from 30 euros to 140 euros per ton.the economist continues.

So in this second quarter, the profits of the five major oil companies reached $62.4 billion – equivalent to Bulgaria’s GDP – including $5.7 billion for TotalEnergies alone. The French giant increased its result to 2.6. According to experts, the profitability of oil refineries is achieved when the margin is 30 euros per ton of oil. From 2015 to 52 euros per ton, margins began to increase by 2019. How?“By reducing their processing capacity”Jamal Bouoiyour explains.“The result was to expand the market and therefore increase margins. »

Even more burdensome is VAT

Tax is the first driver of price increase at the pump as it accounts for 60% of the price. Some of the taxesdoes not depend on fluctuations in the price of a barrel“, the Cepii economist continues, as a domestic consumption tax on frozen energy products (Ticpe) since 2018. On the other hand, the value added tax (VAT) develops at the same time as the price increase.

Thus, the VAT for a liter of gasoline at 2 euros per liter is about 20 cents, and at 1.50 euros per liter, VAT revenues to the state are only 15 cents per liter. This fee is higher as it applies to the total amount (including Ticpe). “It is, so to speak, a tax on a tax», summarizes Jamal Bouoiyour. Since the beginning of the year, this increase has brought about 2 billion additional income to the state. The surplus used to pay for discounts at the pump where fuel was 18, then 30 cents a liter.

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