From the borehole to the gas station: who earns money from the expensive sprint

Status: 06/22/2022 08:20 a.m

Despite the tank discount, fuel prices are high. How they come about is unclear. But it is clear who earns everything – from the borehole to the gas station.

An analysis by Dirk Vilsmeier and Kilian Neuwert, BR

Around two euros for a liter of diesel – that’s the new reality at many German petrol pumps. It’s been there for three weeks tank discount. But the noticeable relief remained absent so far.

At times, many of his customers would only fill up for ten euros, says Franz Ritz, who runs a gas station 20 kilometers south of Munich. A few weeks ago, people were “sucked up,” he says. Especially at prices beyond the two euro mark. On the other hand, if you listen around at the petrol pumps, the most noticeable thing is helplessness – or sarcasm.

One Special levy for mineral oil companies brings a woman into play, just like Federal Minister of Economics Robert Habeck from the Greens could imagine. But the mineral oil companies are only one link in the chain of those who earn money from the fuel. The way from the borehole to the gas station is long. Prices are influenced by many factors.

Cost factor oil drilling

The first factor is the costs that are directly associated with the search for the oil: When the order books of oil drilling specialists are full, their prices rise, says industry insider Kai Eckert. He is editor-in-chief of Energie Informationsdienst, a specialist publisher for the energy sector.

Full order books for drilling companies are usually a direct result of high oil prices. According to industry experts, the search for oil will then increase. On the other hand, if a lot is found, the price usually goes down because the supply increases.

Oil changes hands underground

Those who own oil deposits make the most money. Today, these are usually states such as Saudi Arabia. The production costs for a barrel of crude oil there are a few dollars, the selling price is currently around one hundred dollars.

However, crude oil can change hands quickly — sometimes before it even sees the surface. In so-called futures trading on the commodity exchanges, crude oil is also traded long in advance. The price is then fixed, for example, a year before the delivery date. This creates planning security for sellers and buyers.

Commodity traders, speculators and banks for interim financing are also involved. This is due to the huge amounts involved. A large oil tanker’s cargo can be worth hundreds of millions of dollars.

Storage capacities invite speculation

A special feature of the oil market is the high storage capacity. According to the economist Andreas Loezel, these invite speculation. When prices are low, it is worth storing oil and waiting for prices to rise before selling it, says Loeschel, Chair of Environmental and Resource Economics and Sustainability at the Ruhr University in Bochum.

Tanks for storage can be located directly at the borehole in the country of origin. Usually, however, larger quantities of oil accumulate in the ports or at collection points for the pipelines, where there is also a larger infrastructure for storage.

Subsequent transport essentially takes place by tanker or pipeline. While the pipelines are a long-term infrastructure investment and yield fairly consistent returns, oil tanker charter rates, although there are many around the world, can go up or down. For example, when the oil markets are in shock, as with the corona pandemic or the Russian invasion of Ukraine.

High concentration in the oil market

After all, the crude oil is usually processed where it is needed – namely near the consumer. This is simply because the transport of crude oil is cheaper than the transport of the finished products, says commodities economist Loechel.

The ownership structure is therefore very different from that of crude oil: most refineries are in the hands of the big oil companies. The prices there do not automatically follow the price of crude oil. Sometimes they are high when the price of crude oil is low, sometimes vice versa.

Cartel Office wants insights

Why it is like that, The Federal Cartel Office now wants to find out. So far, the gas station business in particular has always been scrutinized. Now it’s about the refineries and the subsequent wholesale trade. Among other things, the market watchdogs want to check the price at which refineries buy oil and the price at which they sell oil products. “Exactly to the cent,” says the head of the agency, Andreas Mundt, so that the cartel office can form its own picture.

However, evaluating the numbers can be difficult. In principle, even the Cartel Office cannot ban high prices and profit margins – at least as long as the rules of the game are observed. However, since competition is limited due to the small number of companies on the market, there is a risk that competition will only work to a limited extent, according to Mundt.

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