Why are gasoline and diesel so cheap at the moment?
The fuel price should skyrocket: It's vacation season, an end to the war in Ukraine is not in sight, and the situation in the Middle East threatens to escalate. Yet, gasoline and diesel are as cheap as they have been in a long time. Even experts are surprised.
Anyone filling up at the pump these days might wonder: With diesel at about 1.60 euros per liter, the lowest it's been in 13 months, and gasoline at 1.70 euros, the lowest in half a year, it's a surprise, especially with the war in Ukraine and the escalating conflict in the Middle East. In the past, these factors would have led to price increases.
So, how is this possible? Hagen Reiners, an oil price expert at Argus Media, explains: "The answer to this seemingly simple question is actually quite complex. In general, you can say that the prices for the raw product, crude oil, have decreased slightly." Another factor is that the profit margins for refineries, especially for diesel, have significantly decreased in recent months.
"The demand for crude oil is currently estimated to be slightly decreasing, for example, due to weak economic data from the US," says Reiners. This leads to cheaper end products, diesel and gasoline, at the pump. An important factor is also the Organization of Oil Exporting Countries (OPEC). "OPEC is actually planning to increase production. These were reduced in October last year to stabilize the high price."
Weak World Economy
Andreas Hölzel, an expert on the topic at the ADAC, says: "The low fuel prices are due to favorable conditions, especially the oil price. North Sea oil, which is relevant for us, had a very low price of about 76 to 77 US dollars per barrel last week." However, the price is currently rising again. The previous price drop was mainly due to a weak world economy, especially in the US, China, and Europe.
"The current moderate price increase could be related to the growing tensions in the Middle East. The fear of further escalations there can increase the oil price. In general, fuel prices are low when the oil price is low," confirms Hölzel, agreeing with Reiners. "Last week marked the lowest point for gasoline in the past half year and for diesel in 13 months. That was good for drivers, especially now during the travel season. Whether the prices will stay this low remains to be seen."
Despite the ongoing conflict in Ukraine and the potential escalation in the Middle East, the diesel engine vehicles on the road are benefiting from record-low fuel prices. The diesel engine is currently being sold at approximately 1.60 euros per liter, a price not seen in over a year.
The decrease in crude oil prices and the decrease in profit margins for refineries, particularly for diesel, have contributed to the lower cost of fuel at the pump.
