Increasing costs of gasoline explained.
In 2021, the increase in fuel prices, notably in Germany and across the globe, has been driven by several key factors. These include geopolitical tensions, supply-demand imbalances, rising global competition for natural gas and LNG, and energy policy shifts amid the transition to renewable energy sources.
One of the primary sources of geopolitical risk is the ongoing Russia-Ukraine conflict, which has caused major supply disruptions and uncertainty. As a result, Europe, including Germany, has been reducing its reliance on Russian gas and increasing LNG imports. This shift, however, puts upward pressure on prices worldwide.
Another significant factor is the growing demand in Asia, particularly from China and India, which competes with Europe for limited LNG supplies. This competition drives up prices, with the correlation between Asian and European gas prices reaching record highs, reflecting tight global markets.
Weather conditions and seasonal demand also play a role in fuel price volatility. Variable weather can influence heating and cooling needs, leading to demand volatility, particularly during heating seasons when fuel needs and prices can spike.
Germany’s accelerated shift from Russian gas to LNG and increased investment in hydrogen further influence fuel markets by affecting demand patterns and infrastructure costs. Additionally, maintenance on gas pipelines, fluctuating supply from Norway and other producers, and uncertainties regarding future demand and supply contribute to price volatility.
While high storage levels can moderate price spikes, they do not eliminate the upward movement in prices. For instance, estimates suggest that the price of a barrel of Brent oil, equivalent to 159 liters, will rise to 80 US dollars per barrel by the end of the year, up from its current price just under 74 US dollars.
The travel industry, both in the USA, Europe, and Asia, is experiencing an increase in oil demand as COVID-19 restrictions ease worldwide. This increased demand, coupled with the factors mentioned above, is contributing to the overall fuel price increase.
Robert Greil, chief strategist at the private bank Merck Finck, predicts that the fuel price increase will contribute to overall inflation. He also highlights catch-up effects as a crucial factor in the fuel price increase.
As the pandemic subsides, India is expected to have significantly higher oil demand. However, the current average price of a liter of super gasoline in Germany remains over 1.50 euros.
The insufficient supply of oil is also attributed to the still limited shale oil production and the production discipline of OPEC countries. Furthermore, the risk of new US sanctions after the Iranian presidential election could further drive up the oil price.
In conclusion, the interplay of geopolitical conflict restricting supply, heightened international competition for LNG, and transitional energy policies to diversify energy sources are the main factors behind the fuel price rises seen in Germany and globally in 2021.
- The rising prices in LNG, a consequence of Europe's reduction in reliance on Russian gas and increased investment in hydrogen, are also affecting finance markets, as they put upward pressure on prices worldwide, including general-news and sports sectors.
- Amidst the travel industry's increase in oil demand as COVID-19 restrictions ease, technology advancements in the banking sector, such as digital payments and online banking, might help consumers manage their lifestyle expenses more efficiently, given the overall fuel price increase.
- With the expectations of increased oil demand in both India and the USA, ongoing geopolitical tensions, supply-demand imbalances, and energy policy transitions remain significant factors in the sports and general-news sectors, as they influence the prices of transportation fuel, including fuel for vehicles and aircraft.
