Who really benefits from the tank discount

Savings of around 35 cents for Super E10 and 17 cents for diesel should actually reach consumers. This is how high the taxes are that the federal government waives on oil companies per liter of fuel sold from June to August. But there is no obligation for gas stations and oil companies to pass on the tax cuts to customers. The setting of prices is a matter for the market.

According to the minister, the mineral oil companies have not sufficiently passed on the reduction in energy taxes at the pump. The Bundeskartellamt’s first data sets on the tank discount show that the gap between crude oil and gas station prices has increased significantly since the beginning of the month.

“Obviously, what many experts had warned about has happened: the mineral oil companies are reaping the profits, the consumers are not noticing the tax cut,” said Habeck.

Around two thirds of the tax relief seep away as additional income from the mineral oil companies since June 1st. This is the result of calculations by the economist Johannes Schwanitz, according to a report by “Welt”.

In the first ten days since it came into effect, only 10 cents of the 35.2 cents in tax savings per liter of premium E5 petrol benefited consumers, while 25 cents remained as additional profit for companies.

Why weren’t refineries and their pricing investigated earlier, how does the oil lobby defend itself? And how fair is the tank discount anyway? We answer the most important questions:

The most important questions and answers:

Are the oil companies colluding on prices?

The Federal Cartel Office, which reports to the Ministry of Economics, has noticed a noticeable divergence in refinery and wholesale, gas station and crude oil prices since the beginning of the war in Ukraine. While the average difference between the petrol station prices without taxes from E5 to the price of crude oil in 2021 and up to February 2022 never exceeded 40 cents, this difference was at a significantly higher level after the beginning of the war and has fluctuated between 40 and 50 cents since then. Since May 27, the gap has increased again to around 60 cents.

So far, economists have not understood the reason for the large gap between mineral oil prices and fuel prices. What is striking, however, is that the refinery sales price jumped up precisely when the tank discount was introduced in June.

Mathematically, the differences between the refinery sales prices and wholesale prices in relation to the oil price increased significantly before and with the start of the tax cut. This could indicate collusion within the industry. Christian Küchen, General Manager of the industry association en2x, is convinced “that there are no price agreements here”.

Unfortunately, there is little evidence to date on the question of whether the increased gap between the price of mineral oil and fuel is due to a lack of competition, mainly because the processes that can influence prices at refineries have not yet been adequately analyzed, the Monopolies Commission said Request of the Handelsblatt with. The Cartel Office has now initiated a sector investigation.

Why hasn’t the Federal Cartel Office intervened so far?

Andreas Mundt, President of the Bundeskartellamt, points out: “Neither the Bundeskartellamt nor any other authority in Germany can lower prices at the push of a button.” Only if the authority can prove that there were direct agreements between the oil companies can they identify an antitrust violation and this sanction. In the case of tacit agreements in the industry, so-called tacit collusion, the Cartel Office can neither intervene nor punish violations. But it is precisely these tacit agreements that economists from the Monopolies Commission and the Ministry of Economic Affairs suspect in the oil industry.

Could the current situation have been prevented?

As early as 2012, the Monopolies Commission called for a sector inquiry into the refinery and wholesale sectors. This was initiated but not continued. The Düsseldorf economist Justus Haucap, who was a member of the Monopolies Commission from 2006 to 2014, says: “One would have been better prepared today if the investigation had taken place. It was a mistake on the part of the Federal Cartel Office not to pursue the sector inquiry any further.”

She had secretly disappeared without explanation. Sector inquiries were used precisely to gain knowledge about areas that are seen as tending to be problematic and also to be better prepared if something happens.

According to the cartel office, the investigation was discontinued as a result of the establishment of the market transparency office for fuels. “We also had to focus limited resources on this project in the energy sector.”

Haucap does not accept the argument: “The market transparency office refers to the gas stations and their prices. This doesn’t tell us anything about the behavior of the refineries and wholesalers and doesn’t help to identify the problems there either.” cope with existing resources.

What does the oil lobby say to the criticism that the oil companies would enrich themselves with the tank discount?

The oil companies reject the criticism. Christian Küchen, Managing Director of the en2x association, emphasizes “that the tank discount will be passed on”. The world market prices for petrol and diesel are decisive for the pricing of the filling stations. They have risen parallel to the prices at the petrol pumps in Germany. “The world market prices are not dependent on a German tank discount,” says Küchen.
In a European comparison, the German price level before taxes is even “in the lower midfield”. Gasoline and diesel prices have been “sometimes significantly higher” in other European countries in recent weeks. Küchen’s association has no figures on whether oil companies in Germany have increased their profit margins. However, the lion’s share of the quarterly profits of the international oil companies were achieved in crude oil production.

According to the oil companies, what are the reasons for the price increases?

Kitchens from en2x refers to the increased demand from the USA and Eastern Europe. Gasoline offered on the spot market in Rotterdam is often bought up by gas station operators from the USA who accept higher prices. Other price drivers are higher energy prices at the refineries and a slightly tighter supply due to the withdrawal from Russian oil imports.

Economists are skeptical. “The development of wholesale prices in Rotterdam can hardly justify the recent price increase at the petrol stations,” says Felix Matthes from the Öko-Institut. There is “a lot to suggest that refiners and wholesalers are benefiting from significant profit-taking,” says Matthes. “So part of the tax cut benefits them directly.” However, it is difficult to prove. Because the industry doesn’t let its cards be looked at.

Would more transparency on pricing help?

The energy economist Hans-Wilhelm Schiffer is convinced that more transparency could help to counteract “overstimulation in pricing by companies”. Schiffer, a member of the Studies Committee of the World Energy Council, refers to the “National Information System” (NIS) on the cost situation on the German oil market.

During the energy crises of the 1970s, the then FDP-led Federal Ministry of Economics agreed the NIS with the mineral oil industry on a voluntary basis. The system included reports on the crude oil supply costs, the import prices for petroleum products, the main cost elements in the areas of processing and distribution, the net proceeds by main product, the profitability analysis and the sales structure of the petroleum industry.

The system has “made an important contribution to increasing the transparency of the earnings situation on the mineral oil market for the public,” says Schiffer. “In view of the suspicion that consumer prices for petroleum products are too high, the introduction of an ‘excess profit tax’ is currently being intensively discussed. It would make sense to first create transparency about the facts before considering such a systemic intervention in the taxation of companies in an individual sector,” says Schiffer.

Is the tank discount socially fair?

Economists have serious doubts about this. “The socio-political objective of the tank discount is understandable in principle, but this instrument will have an imprecise – because blanket – effect in this respect,” says Marc Oliver Bettzüge, Director of the Energy Economics Institute at the University of Cologne (EWI). “In order to achieve greater socio-political precision, a distribution instrument would have to differentiate according to aspects such as the level of household income and the respective quality of local public transport,” recommends Bettzüge.

Does the tank discount increase dependence on fossil fuels?

Discounts on fuel counteract efforts to save. This has an undesirable effect: “The tank discount should – compared to the situation without this discount – increase the consumption of petrol and diesel across the board. This tends to increase dependency on oil imports, and that in a precarious geopolitical and economic situation,” says EWI boss Bettzüge.

More: Guest commentary by Hans-Wilhelm Schiffer: Tank discount and excess profit tax: We need a transparency system that Germany already had