Friday, September 29, 2023

Do our European neighbors pay as much for fuel as in France?

Do our European neighbors pay as much for fuel as in France? If prices are skyrocketing at French service stations, the same is happening in other European states. But some do better than others.

An unprecedented measure. To lower prices at the pump, the executive is preparing to authorize distributors to sell their fuel at a loss, “since the beginning of December“, for a period of “six months“. If the Government’s decision has left some commentators skeptical, it says a lot about the concern raised in the upper echelons of the State about rising fuel costs. French motorists now have to pay an average of 1.96 cents per a liter of SP95 gasoline and 1.88 cents for a liter of diesel, according to weekly data from the European Commission. We have to go back to April 17 – for oil – and February 6 – for diesel – to find such levels high.

However, the French are not the only ones who see their wallets lighten when leaving the gas stations. In all eurozone countries, a liter of unleaded gasoline has increased by twenty cents on average since the beginning of the year, going from 1.71 euros to 1.9 euros. During the same period, the price of diesel increased from 1.77 euros to 1.80 euros. The observation, extended to the entire European Union, is even more obvious: the price of the SP95 has never risen so much in a year. Today it reaches 1.81 euros on average, compared to 1.66 euros nine months earlier.

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Prices make a big difference at the European level

If the entire continent is affected by this price increase, prices at the pump are particularly high for French motorists… and often more expensive than those of our European neighbors. SP95 gasoline is cheaper in Spain (1.73 per liter on average), in Belgium (1.86), Luxembourg (1.64), and even in Germany (1.94). At the EU level, only a few countries are more expensive than France: Denmark (2.05), Finland (1.98), Greece (2), Italy (1.96), and the Netherlands (2.10). On the contrary, a handful of countries have unbeatable prices, such as Bulgaria (1.42), Poland (1.39) or Romania (1.47). As for diesel, France is even worse, since only the Scandinavian countries (Sweden, Denmark, Finland), the Netherlands, and Belgium have higher prices.

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To understand these disparities, we must consider the many factors that determine the price at the pump that Europeans pay. “The price at the pump, regardless of the country, is defined by five parameters: the price of the barrel, the euro-dollar exchange rate, the refining margin, the distribution margin, and, finally, taxes. explains Philippe Charlez, energy expert at the Sapiens Institute. It is the increasing cost of a barrel of Brent in international markets that explains, in the first place, the increase in prices at European service stations. “Since June, the price of Brent has increased significantly, supported by strong demand from Southeast Asian countries, on the one hand, and, on the other, by the voluntary reduction in supply decided by OPEC and Russia.“Earlier this month, Saudi Arabia and Russia announced oil production cuts until the end of 2023, news that sent crude oil prices to their highest levels in ten months.

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The “refining margin», which corresponds to the difference between the valuation of refined products and the price of Brent, also hurt Europeans. Listed in Rotterdam, “Refining margins have increased by 35% in recent months, again for supply and demand reasons.», says the expert.

Between 36% and 56% of fuel taxes in Europe

These two parameters are common to all the countries of the Union. The others, however, differ depending on the country. This is particularly the case with distribution margins. “They include transportation of fuel to the distribution point and fuel pump costs, which differ by location.», explains Philippe Charlez. But, according to the expert, the distributors are not mainly responsible for the increase in French prices. “In France, as elsewhere, distribution margins have decreased considerably in the last two months, obeying a law that requires that when refining margins increase, the distributor’s margin decreases.», reports Philippe Charlez.

That leaves taxes. It is through this lever that States can directly influence the price of fuel at the pump. “Between 36% and 56% of the fuel price in Europe comes from public authorities: this is the fuel tax», agrees Philippe Charlez. This is deliberately heavy-handed, to encourage motorists to change their behavior and purchase more modern, less fuel-efficient, and less polluting vehicles. However, fuel taxes are far from uniform across Europe.

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While France has three fuel taxes – TICPE, VAT, and VAT on TICPE – which represent 52% of the price of gasoline at the pump (49% for diesel), some countries are more lenient on motorists. This is the case in most Eastern European countries (Hungary, Bulgaria, Romania, etc.), whose proportion of taxes on the invoiced product barely exceeds 45%. Only a few European countries tax oil more than the French State: this is the case of Italy (55% of the product sold), Greece (55%), the Netherlands (55%), and Finland (56%). France stands out above all for its high level of taxation on diesel, five points higher than the European average.

In general, the countries that charge the least taxes are those whose motorists benefit from the best pump rates. Only a few exceptions are worth noting. At an equivalent tax level, Belgium benefits from a diesel price that is, on average, less advantageous than that of France (1.9 euros per liter).

The paradox is even more surprising in Sweden, which taxes diesel only 36%, but pays much more for it than in France, at 2.15 euros per liter on average. “This can only come from the distribution margins and can therefore be interpreted as a good point for our national network of distributors, undoubtedly more competitive than elsewhere», estimates Philippe Charlez. This a national advantage that could grow even further once French distributors are authorized to “sell at a loss», as the government wishes.

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