Study confirms: Oil companies are slow to pass on declines in oil prices to customers

There is great public excitement about the question of whether and to what extent the oil companies pass on the tax reduction from the fuel rebate to consumers. It could end up like in the spring, with the majority of the tax cut reaching the customer. The bigger problem in the fuel market, however, is that companies generally pass on higher oil prices quickly and comprehensively, but low oil prices only very slowly and only partially pass them on to customers. In science, this is known as the rocket-feather effect: when oil prices are higher, prices for gasoline and diesel rise rapidly like a rocket; when oil prices fall, they fall slowly like a spring. That's why customers at the gas pumps have the impression that they are being left out.

Three economists working with Tomaso Duso, chairman of the Monopolies Commission, have now shown in a study that this impression is supported by the facts. Germany is doing particularly poorly in the comparison among 26 states in the European Union. The study is available to the F.A.Z. exclusively and will be published this Monday in the trade magazine “Wirtschaftsdienst”.

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The authors, in addition to Duso, are Ferdinand Fichtner from the University of Applied Sciences (HTW) in Berlin and Sebastian Oschmann from the Monopolies Commission, advocate more competition in order to capture the asymmetrical price adjustments at the expense of customers. Interference with free pricing through fuel discounts, price caps or excess profits taxes should be avoided. They would not eliminate the asymmetric price adjustments and would only temporarily mask them.

According to the study, if the price of oil rises by 10 euros per barrel (159 liters), the price of diesel rises by 10 cents per liter within twelve weeks. If the price of oil falls by 10 euros per barrel, the price of diesel only falls by 7.5 cents. This means that diesel prices are rising more than the higher oil price would justify. “In times of rising oil prices, there are deadweight effects for companies,” said Fichtner from HTW.

There is also evidence of a sharp asymmetry in the speed of adaptation. It only takes two weeks for the oil companies to pass on 90 percent of higher oil prices to diesel customers. However, if the price of oil falls, it takes nine weeks for 90 percent of the price reduction to reach the pumps.

Gasoline prices show similar, but less severe, responses to changes in crude oil prices. The study is based on price data from 2005 to 2025 and covers 26 EU countries. Asymmetric price adjustments exist in all countries, but in Germany they are much stronger for diesel than in the other countries. When it comes to gasoline, Germany is second only to Finland.

The three economists expressly emphasize that the price asymmetries to the detriment of customers have nothing to do with fuel taxation or refueling discounts. The effect lies in the pre-tax margin, is independent of the past years of crisis and has tended to increase in recent years. “It is a case for competition policy, not for tax policy,” says Fichtner. “Attempts to get the problem under control with tax cuts are just tinkering with symptoms.” The authors assume that there is insufficient competition at the level of the few refineries and wholesale providers, but not at the level of the many gas stations.