A price comparator could combat inexplicably high fuel prices in Switzerland
Crude oil prices are now back to January 2022 levels, but retail pump prices are now more than 20% higher than they were then. Many wonder why. Without cost transparency, suspicion naturally abounds.
In mid-January 2022, before Russia invaded Ukraine, WTI crude oil was trading below $90 per barrel. Then, a liter of gasoline in Switzerland sold on average 1.71 CHF (1.88 US$). As of August 15, 2022, WTI crude had fallen back below USD 90 per barrel after peaking at over USD 120 in May 2022. However, the pump price per liter of fuel remains at the suspect price of CHF 2.17. ($2.29). Prices for diesel at the pump in Switzerland have followed a similar trajectory.
If the fuel tax has not changed and the gross cost of inputs (mainly crude oil) is back to its January 2022 level, why is the retail price of a liter of gasoline now 22 % higher in US dollars than it was in January?
Without more transparency, it is difficult to answer this question.
The price of a liter of fuel at the pump is made up of the price of crude oil, the cost of refining plus the margins taken by refiners, the cost of distribution and marketing, a retail margin and taxes. In Switzerland, taxes have not changed since January and we know that the price of rough has returned to what it was. Therefore, the mysterious 22% price difference must be somewhere in refining costs and margins, distribution and marketing costs, and retail margins.
Prior to Russia’s invasion of Ukraine, some of the gasoline and diesel consumed in Europe was refined in Russia. A BBC report in June 2022 suggests that refiners outside Russia are using a shortage of refining capacity to rake in high margins. Refined gasoline margins increased by 366% and diesel margins increased by 648%, according to the BBC article. Higher refining costs and margins therefore probably explain part of the price difference. Higher transportation costs could also be a factor.
Price stickiness, a phenomenon where firms are quick to raise prices and slow to lower them, could explain much of the rest. The trigger for lowering prices is competition. In many sectors in Switzerland, price competition is weak, which highlights this problem. A Swiss parliamentary committee thinks that a fuel price comparison website could help solve this problem.
According to a parliamentary committee, a digital platform showing the price of fuel at petrol stations across the country would help combat high prices. Consumers could see where the cheapest fuel is and buy there. 16 voted in favor of the idea against 7 against. The commission also decided (12 votes to 10) to introduce a motion to investigate alleged competition concerns in the energy market. This work would be carried out by Comco, the Swiss competition watchdog. Germany, Austria and the United Kingdom have already launched similar surveys.
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