Germany's new era of higher fuel prices

26th May 2004, Comments 0 comments

Germany might be known for its peak performance autos and high-speed freeways, but surging fuel costs means that Germans have been forced to seek out other alternatives to the private car. And, as Douglas Sutton writes, this could just be the start of soaring petrol pump prices.

After surging beyond USD 40, some analysts see oil prices hitting USD 45

In a country of sleek high-tech cars and no speed limits on its superhighways, as well as pride in their Formula One racing champion Michael Schumacher, German motorists these days are starting to have to think a bit more modestly about their driving habits.

Instead of their cars, many are considering subways and buses. Others are getting out their bicycles - and some are even starting to walk again - as a means of getting around in a way they can afford.

The reason: record-high prices at the fuel pumps. In recent days, super-grade fuel has gone beyond EUR 1.23 per litre - with no sign of relief in sight.

The rising motor fuel prices come atop the higher costs which are a result of the German government's controversial social and health care reforms.

The country's latest cost-of-living figures showed that fuel costs were a chief factor in boosting annual inflation in May to its highest level in two years to 2.1 percent from 1.6 percent in April and 1.1 percent in March.

And, as if all this were not enough, Transportation Minister Manfred Stolpe added to the uncertainty - and anger - of German motorists when he released what looked like a trial balloon in musing about average motorists having to pay highway tolls. This, indeed, would be the last straw for many Germans.

*quote1*"We're Fed Up" was the huge headline splashed across the top of the tabloid Bild newspaper and beneath it the pictures, names and comments of 58 German citizens from all walks of life as they blasted the prospect of tolls for using their highways.

With the Social Democrat-Greens government's series of "eco-taxes" - charged at the petrol pump to produce revenues for the government - petrol prices have been steadily rising over the past few years. German motorists grumbled but paid the price and kept driving.

But now, according to a poll conducted for the Deutsche Presse- Agentur dpa, Germans are re-thinking their driving habits, forced to do so by sheer economics.

The survey of 1,011 people by polling institute Polis last week showed that one-third of Germans now aims to drive less than before. One-third also said they planned to try to drive more conservatively in order to save their precious fuel.

For 31 percent of those questioned by Polis - with people able to respond to more than one possibility - walking is now seen as a viable alternative at least for shorter distances, while 25 percent said they aim to use their bicycles. Thirteen percent said they would be switching to public transportation.

But 19 percent said they planned no change in their driving habits and would simply have to accept the higher fuel pump prices.

*quote2*In another poll, by the Emnid institute, a whopping 90 percent of motorists said they were considering buying smaller, more fuel-efficient cars than they now have. And 85 percent said they would have to cut back in terms of money spent on maintenance and repairs.

An irony in the German petrol market situation is that two factors should be working against higher prices. First, with oil prices denominated in dollars, the stronger euro should help to absorb the impact of rising petroleum rates.

And secondly, motor fuel consumption has declined in Germany, thanks to more efficient engines. Under normal supply-and-demand market rules, lower demand should also mean lower prices.

Germans reduced their petrol consumption last year by 4.9 percent to 25.9 million tons, and a further drop is foreseen this year, according to the Petroleum Industry Association (MWV) in Hamburg.

But the MWV points out that Germany cannot operate independently of the world market. There, oil prices have at one point surged to record levels of beyond USD 40 per barrel, with some analysts seeing prices reaching USD 45.

And on the Rotterdam petrol market, petrol now costs around USD 465 per ton, up more than 50 percent from a year ago, according to the MWV. Even a stronger euro cannot absorb all that.

But world market demand is being fuelled by the thirst of the US economy and motorists there, the MWV said. It said the United States, unable to cover its needs from its own production and refining, is projected to have to import some 40 million tons of petrol this year.

"There is a lot to point to higher prices to come," commented Reiner Wiek, chief editor of the petroleum industry newsletter EID.

May 2004

[Copyright DPA with Expatica]

Subject: Life in Germany, petrol prices, energy prices

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