Why diesel is more expensive than petrol at the petrol station

As a driver of a car with a diesel engine, you recently had every reason to complain. In normal times there is a kind of deal: a diesel driver pays more for the car, but the fuel is cheaper. This adds up over the years. But times are not normal: Since July, a so-called inverse fuel price ratio has been observed almost continuously in Germany: Although diesel is charged around 20 cents less energy tax than petrol, the end consumer price at the petrol station is higher.

Even after the introduction of the fuel discount, not much has changed. The price for Super E10 fell below two euros at some gas stations on the first day, while the price of lower-taxed diesel remained stubbornly above that. Even now on Friday and Saturday, diesel remained significantly more expensive than Super E10.

Anyone who follows political developments around the world will also have noticed that diesel has developed from a boring petrol station product that hardly anyone outside the petroleum industry thinks about, to an object of intense political attention.

It was US President Donald Trump who discovered diesel prices for the election campaign. Before the midterm elections in the USA, he believes it would be disadvantageous if drivers had to pay record prices at gas stations. His favorite idea: a US export ban on diesel. The calculation behind it: If the Americans produce a lot of diesel but are not allowed to export it, the price will fall at home and rise abroad.

Trump threatened Europe that the US export ban would come if the Europeans did not release their strategic reserves. Apparently with success: On Friday the report came from Brussels that the G7 countries were making up to 100 million barrels of oil and diesel available. It cannot be ruled out that Trump will still impose an export ban. But the probability has decreased.

Russia made the situation worse. After Ukraine attacked Russian refineries with drones, President Vladimir Putin imposed an export ban in July that has just been extended. Even though many countries no longer purchased diesel from Russia because of the sanctions, the shortage on the world market was felt in the form of higher prices.

The announcement of the opening of the strategic reserves has now caused the stock market price for diesel to fall. Analysts explain it like this: When setting prices, the stocks in commercial warehouses are taken into account, but not those in strategic warehouses. So there is now more diesel available. The release is likely to ease short-term physical market tightness and dampen price reaction. However, it does not eliminate the underlying causes of scarcity.

All of this leads to the question of how serious the diesel supply is. Are there real bottlenecks when the warehouses are cleared? A look at the numbers. Gasoil is the raw material for diesel. Five million barrels of such oil products used to be transported through the Strait of Hormuz every day. There are problems with them now. There is also war-related damage. According to estimates by the Landesbank Baden-Württemberg, 1.5 to two million barrels (159 liter barrels) per day of refinery capacity are likely to be lost in Russia, and a further two to 2.5 million barrels per day in the Middle East.

Refineries around the world are therefore operating at higher capacity and can charge higher prices. The crack spread, the price of converting a barrel of crude oil into a barrel of gas oil, rose from $20 to more than $100 at one point before falling slightly.

You can feel all of this in Germany. Today, Germany hardly buys any diesel from Russia. But the shortage on the world market is driving up the price. The United States, on the other hand, plays a direct role: a good five percent of German requirements are expected to come from the USA. If Trump were to turn off the diesel tap, diesel could become 20 to 25 percent more expensive, Commerzbank estimates.

However, observers consider physical bottlenecks to be rather unlikely. There are three arguments for this. First, there is significant inventory. Secondly, the refineries in this country have also increased diesel production, encouraged by the high price. And thirdly, Germany is one of the regions that could pay relatively high amounts for diesel if things get tight. This suggests that, in the worst case scenario, diesel from poorer parts of the world will be diverted here.