The frenetic escalation of fuels has no sign of an end soon. Both gasoline and diesel continue to break records almost daily and, according to forecasts, the same trend will continue in the immediate future. Without going any further, this Wednesday the liter of unleaded gasoline 95 and the diesel It has already exceeded 2 euros in almost a dozen gas stations in Spainaccording to data from the Geoportal of the Ministry for Ecological Transition.
“That gasoline and diesel reach 2 euros per liter in a general way is not a question of whether it will happen or not, but of when it will take place”, points out to RTVE.es the general director of the Spanish Confederation of Service Station Entrepreneurs (CEEES), Nacho Rabadán, who takes it “practically for granted” in the coming weeks.
Fuels have been immersed in this upward trend since May 2021, when a liter of unleaded 95 cost 1.074 euros and that of diesel 0.981 euros. Today, on the other hand, it is paid at 1,608 and 1,496 euros on average, respectively, according to the latest data from the European Union Oil Bulletin corresponding to February 28. In just one year, prices have increased by 50%.
“In the last month there have been increases of two cents a week, but it is not a real picture of what is happening right now because it has rained a lot since last February 28. This Thursday the Oil Bulletin is updated and it will foreseeably reflect a reality more adjusted to what is really happening”, emphasizes Rabadán, since these data hardly take into account the impact of the Russian invasion in Ukraine.
The war in Ukraine has aggravated the situation
Precisely, the increase in demand due to the economic recovery after the pandemic triggered the price of a barrel of oil and, far from being compensated, the conflict between Russia and Ukraine has only aggravated the situation. Last week, the barrel of Brent oil -a benchmark in Europe- it shot up to 138 dollarsreaching maximums since 2008, due to fears of a reduction in supply, since Russia is the largest exporter of crude oil and oil products worldwide.
“Right now there is a lot of uncertainty and a lot of volatility. Making forecasts of the price of crude oil I think is always wrong, but more so in this context, in which there are so many factors that influence, “says RTVE.es the spokesperson for the Spanish Association of Operators of Petroleum Products (AOP), Inés Cardinal, who urges in the coming weeks to see “how the conflict between Russia and Ukraine develops, how the economies grow and, therefore, their demand for energy, and how the Organization of Petroleum Exporting Countries (OPEC) responds to that increase”.
However, in recent days the barrel of Brent took a little breather. On Wednesday, North Sea crude for May delivery fell to $124.01 after the United States banned imports of oil, natural gas and coal from Russia. This contrasts with the price we pay at gas stations which, as we said, has not stopped rising in recent weeks. How is it explained?
“Indeed, one of the questions that everyone asks is why gasoline is at its highest, if the price of oil is not. But in these cases, a rule of three cannot be made because there are many factors that influence the price of fuel”, says Cardenal. Among them, the euro-dollar exchange rate or the price on international markets. In addition, the expert insists that current prices cannot be compared with those of a decade ago, with the previous maximum, because since then “there have been increases in taxes and regulatory costs”: VAT has been raised from 18 to 21%the special tax on two occasions, biofuels were not taxed…
“In the end, they are costs that exist on the price of fuel and, therefore, do not allow for that direct comparison. In other words, there are many more factors that influence in addition to the international price”, concludes the expert.
The sector predicts a drop in consumption
From the sector they agree that they see the situation “with great concern” because “historical maximum prices have been reached and also without a perspective that allows us to be optimistic due to the invasion of Ukraine”. This is what the general secretary of the Association of Service Station Employers of the Autonomous Community of Madrid (AEVECAR), Víctor García Nebreda, points out to RTVE.es, who believes that “as long as the situation of risk and uncertainty created by the war continues, the markets will not stabilize and they are going to continue to be tremendously speculative.”
“Russia is one of the largest oil producers and it is very difficult to compensate for the lack of supply, especially considering that there was already a gap between supply and demand due to the economic recovery that was taking place across the board. the whole world”, adds the expert.
Given this context, from the sector they predict a decrease in consumption, which in itself “has been greatly reduced”. “It has always been said that the demand for gasoline and diesel was very rigid, but that breaks when prices reach a level where the consumer can no longer afford to pay for them,” says García Nebreda. And it is that, “despite certain opinions”, the general secretary of AEVECAR points out that the service stations prefer “cheap prices that allow the company to maintain margins and that the consumer finds them sufficiently attractive, so that they do not sales suffer.”
Many service stations, doomed to close
From the CEEES they share this diagnosis. According to Rabadán, service stations have begun to buy the most expensive fuel and customers are refueling less, despite the fact that these they do not pass on all the price increase to the pump. In fact, it ensures that your profit margins, if any, stay at 1%. “And from there you have to pay for electricity, which in a service station is everything; the personnel, the transport of the fuel from the refinery, the insurance… With which, these high prices destroy us”, he laments.
The truth is that the majority of service stations in Spain normally belong to an SME or micro-SME, in most cases of a family nature, which keep working in rotating shifts. “If prices continue like this, many service stations will not be able to continue buying fuel and they are going to be forced to close, some temporarily and others permanently”, warns the CEO.
Many of them are even located in emptied Spain, which means that a good handful of towns will be left without service. “It’s like signing the death certificate of an entire region,” adds Rabadán.
However, they want to send “a message of calm” and that is that, according to the AOP, Spain “has a very, very diversified supply of crude oil.” “Last year Russia only accounted for 4.6% of crude oil imports to Spain and according to the latest data from Cores, we have brought 33 types of crude oil from 19 countries”, underlines Calderón. “That makes our security of crude supply very high and that supply is guaranteed”, he concludes.
They demand VAT reductions to 10% as with electricity
According to data from the AOP, almost 50% of the final price of fuels are taxes, 35% corresponds to wholesale costs (basically, the cost of crude oil at origin and refining) and the remaining 15%, distribution costs and marketing margin. For this reason, from the sector they believe that “there is room” to lower prices.
“We have asked the Minister of Finance, María Jesús Montero, to take measures in the fuel market, in the same way that she has done in the electricity market, such as temporarily reducing VAT from 21% to 10%” . With this measure, from CEEES they calculate that between 12 and 14 euros could be saved on average in each refueling. For a self-employed transport, on the other hand, the savings could amount to up to 10,000 euros per year.
At the moment, the measures proposed by the European Commission focus on reviewing price formation in the electricity market and also on getting rid of Russian gas, which accounts for around 40% of the consumption of that hydrocarbon in the EU. But Brussels has not gotten involved, for now, with oil, as Washington has done. This Thursday and Friday, the Heads of State and Government of the European Union will address the energy issue at an informal summit held in Versailles (France).
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.