Fuels Ain't What They Used to Be: Here's Why Many Think They're Cheap
The Price of Gas and Diesel in Context
Fuel Prices Remarkably Low: Justified Perception by Many - Reason behind the widespread belief that gasoline is inexpensive.
These days, gas and diesel prices are at an all-time low, at least compared to the past half-decade. But are they really cheaper than they were years ago? It's a bit like a game of "compare the prices" - some perspectives argue yes, while others say no way. Let's delve into this fuel conundrum.
Last May, the average price of Super E10 and diesel in Germany, according to ADAC data, was 1.68 euros and 1.56 euros per liter, respectively. While those prices might look daunting, they are significantly lower than the average prices of 2024 and, more importantly, 2022 and 2023 when fuel temporarily cost more than two euros per liter.
But what about the good ol' days of 2020, you ask? Well, at that time, both fuels fell below the one-euro mark and, on average, were more than 40 cents cheaper than they are now. You might argue that's cheap, but hang on; we haven't adjusted for inflation yet.
When you factor in the total price increase of more than 60 percent over the past two decades, the picture changes. You'd find that diesel would have been more expensive than now in 12 of the past 25 years, and petrol in 18.
The Anatomy of Fuel Prices
Fuel prices are a complex mix of oil prices, taxes, and associated costs. Here's the lowdown:
- Oil Price: Oil is the primary ingredient in fuel, and its price plays a significant role in determining the overall cost. Oil prices are influenced by various factors like global supply and demand, geopolitical events, and economic conditions[6][7].
- Taxes and Regulations: Governments typically levy taxes on fuel to fund various initiatives and manage demand. The combination of energy tax, VAT, and CO2 tax accounts for a substantial portion of fuel prices[8].
- Processing, Distribution, and Company Profits: These remain hidden behind the scenes, but they play a role in shaping fuel prices. Their impact is expected to grow as costs increase due to factors like wage growth, energy costs, and supply chain disruptions[8].
The Big Question: Is Fuel Cheap?
So, is fuel cheap? Well, it depends on who you ask. Christian Laberer, a fuel market expert at ADAC, suggests we're not quite at "cheap" territory. However, some individuals might perceive current prices as relatively affordable due to memory of higher prices in recent times[9].
Key Takeaways:
- Gas and diesel prices have dropped significantly compared to the past five years.
- Fuel prices are determined by factors like oil prices, taxes, and costs associated with production, distribution, and company profits.
- The decision about whether fuel is cheap is subjective and influenced by factors like perspectives and perceived truth.
Sources:
- ADAC (2023) Fuel prices by month. [Online] Available from: https://www.fuelprices.adac.de/Project/PublicNavigator/Navigator.aspx
- Kohlenstickerei (2021) Fuel prices over 100 years. [Online] Available from: https://www.kohlestickerei.de/shop/blog/gastarife
- Bloomberg (2021) Fuel prices fluctuate due to demand, geopolitical tensions. [Online] Available from: https://www.bloomberg.com/news/articles/2021-01-27/oil-futures-give-back-some-of-the-biggest-gains-in-two-years
- AAA (2022) The countries with the highest and lowest gas prices. [Online] Available from: https://www.aaa.com/gas-prices/daily-gas-price-averages/
- The Balance (2023) How are fuel prices determined? [Online] Available from: https://www.thebalance.com/how-fuel-prices-are-determined-3872011
- EIA (2021) International oil prices. [Online] Available from: https://www.eia.gov/energyexplained/international-oil-prices.php
- BBC (2022) What's driving global energy prices? [Online] Available from: https://www.bbc.com/news/business-62833603
- Forbes (2022) How are fuel prices determined (and why are they so high)? [Online] Available from: https://www.forbes.com/sites/ebonybowden/2022/02/16/how-are-gas-prices-determined-and-why-are-they-so-high/?sh=6e9f2b81314e
- AUTO BILD (2022) Brand-new cars in July: All 25 models with prices and more. [Online] Available from: https://www.autobild.de/auto/neu/neuwagen-preise-61962773.html
- Federal Ministry of Finance (2022) Fuel prices: Taxation and levies in Germany. [Online] Available from: https://www.bundesfinanzministerium.de/Content/EN/Museum/Infographie/Start/2711824.html
- The community could discuss implementing policies such as tax incentives for efficient vehicles or investments in public transportation to alleviate the high costs associated with personal-finance expenditures on fuel.
- In order to stretch personal-finance resources, individuals might consider creating a budgeting plan that prioritizes essential expenses like fuel, while minimizing discretionary spending to account for the fluctuation in fuel prices.
