Reasons Behind the Common Perception That Gasoline Prices Are Affordable
Gasoline Prices in Munich: A Perplexing Question
Gasoline prices in Munich today might seem cheap compared to the prices seen a few years back, but they're still more expensive than they were a decade ago. It's a paradox, and it raises the question, is fuel expensive or cheap? To answer this conundrum, we need to delve into the numbers, the factors influencing the prices, and the psychology of consumers.
The Numbers
According to ADAC, the average monthly price of Super E10 fuel in Munich in May was 1.68 euros per liter, while diesel was slightly cheaper at 1.56 euros. This is less than the average for 2024, but much more than in the years 2020, 2021, or even 2019.
Live in 2020, the cost of diesel was as low as 98 cents per liter, a significant drop from the current prices. In fact, fuel prices were an average of 20 cents lower in the decade from 2010 to 2019. But should we compare prices from a decade ago without considering inflation? Probably not.
When adjusted for inflation, the picture changes. With the total price increase being more than 60 percent over the past two decades, current fuel prices fall right in the middle. According to this calculation, diesel has actually been more expensive than it is now in 12 of the last 25 years, and gasoline in 18.
The Culprits Behind the Prices
To understand why fuel prices fluctuate so much more than other goods, you need to look at the factors that contribute to fuel prices. Generally, there are three significant components: oil prices, taxes, and processing and distribution costs.
The oil price plays the most significant role in these fluctuations, as it ranges greatly, from over 100 euros to under 40 euros per barrel in the last five years. However, it's hard to determine the exact contribution of oil prices to the fuel price due to the many products derived from oil.
State taxes, including energy tax, value-added tax (VAT), and CO2 tax, are responsible for the largest portion of the fuel price, amounting to around 105 cents for Super and 86 cents for Diesel. More than half of this is energy tax, which has remained stable since 2003. Value-added tax plays a minimal role in price development. The CO2 price has only been a factor for a few years, but it's still relatively manageable, at 13 cents for petrol and under 15 cents for diesel.
The remaining part of the price consists of processing, distribution, and profits of the mineral oil companies. These costs are expected to rise along with increasing wages, energy costs, and transportation expenses. However, they account for a smaller portion compared to taxes and levies.
"It wouldn't be entirely accurate to call fuel cheap at the moment," says Christian Laberer, an expert in the fuel market at the ADAC. "2025 might end up being the fourth most expensive year for filling up, if we factor in inflation. There's still room for the price to drop, especially in the wholesale margins and at refineries."
Why Does Fuel Still Feel Cheap to Some?
Laberer attributes this perception to habit and the ability for consumers to adapt to price changes. Even during periods when prices were much higher, people slowly got used to these new levels, and the current prices feel relatively cheap in comparison. As he puts it, "People's perception of the prices is influenced by what they've recently seen. A couple of years ago, prices were much higher, and now that they're down, even slightly, it feels like a savings."
In conclusion, gasoline prices in Munich are affected by global oil prices, taxes, inflation, electricity prices, and the ongoing transition towards renewable energy. While the current prices may feel reasonable compared to the past few years, when viewed in the broader context of historical trends and continued external influences, they might reveal a different story.
- Despite appearing cheaper than several years ago, gasoline prices in Munich are still more expensive than they were a decade ago, a trend that can be attributed to factors such as oil prices, taxes, and the ongoing transition towards renewable energy.
- When adjusted for inflation, current fuel prices in Munich fall right in the middle, suggesting that they have been more expensive than they are now in over half of the last 25 years, indicating that the perception of 'cheap' fuel might be misleading due to habit and adaptation to price changes.
