SCAN ECO – While oil prices lost 20% in one month, prices at the pump fell only moderately, pushing the government to ask the oil companies and distributors for a move. Here are the reasons for this discrepancy.
The story repeats itself. As in 2011, in 2014 or in 2015, the debate over the lag in time between the drop in oil prices and the price at the pump resurfaced. This time in a more stormy context, marked by threats of blocking roads on November 17 and government attempts to calm the grumbling. Since early October, the price of a barrel of oil fell by 20%. The barrel of Brent, European reference, even dropped below the $ 70 mark this Friday, to 69.99 dollars. A first since April. At the same time, WTI, the US benchmark, was down to $ 60.06, the lowest since March. In parallel, according to carbu.com, diesel fuel saw its price fall on average by 3% at the pump (-4.5 centimes / liter) over a month while that of the unleaded 95 fell by 5% (- 8 centimes). Far from the 20% recorded in the world oil markets. Explanations.
• Why is lower prices at the pump slower?
The decline is not of the same magnitude because fuel prices depend for many variables independent of crude oil fluctuations in world markets. Starting with the taxes levied by the state, which weighs heavily in the final price at the pump, namely the VAT of 19.6% and the domestic consumption tax on energy products (TICPE), whose level will increase steadily until 2021, officially for ecological reasons. These taxes represent about 60% of the price of fuel.
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The price of the refined product, which is quoted on the Rotterdam market for Northern Europe, is between 32% and 27% of the price of diesel and gasoline. It depends, of course, on the price of a barrel of crude, but it is also related to the cost of refining and the seasonal demand for this product. According to data from the Ministry of Ecology, the gross margin for refining oil tankers is currently around 27 euros per tonne (against 45 euros per tonne in 2015 for example). As a reminder, the refiners' break-even point is around 25 euros per ton of crude processed. The other positions weigh even less in the composition of the price at the pump, in particular the gross distribution margin (8%). This margin, levied by the distributors, covers in particular the costs of logistics and distribution.
Another factor explaining the lag in prices at the pump: the decline of the euro against the dollar. Black gold is indeed denominated in greenback. But a weaker euro increases oil purchases. The actual decline in the price of fuels sold in euros is therefore lower than the decline in the price of oil in dollars.
• Do industrialists and distributors benefit from the situation?
Tankers such as Total or Shell may possibly seek to dispose of the stock of oil purchased several months earlier at a higher price. Distributors can also benefit for some time from the drop in oil prices to restore their margins. This is the scenario that occurred in spring 2011. "When pump prices exceed 1.50 euro per liter, operators tend to dampen the impact for the customer by taking on them. So, when crude prices have started to fall, there has been a small effect of restoring margin, "said Jean-Louis Schilansky, then president of the French Union of Petroleum Industries (Ufip). In 2011, the maneuver was singled out by the DGCCRF and angered Christine Lagarde, Minister of the Economy, who had threatened industry sanctions sector.
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Today, retailers are refraining from inflating their margins at the expense of motorists. They assure to follow as well as possible the evolution of the price of the barrel. "The final net margin of the service stations is a penny per liter, so it's hard to do more," says Francis Duseux, the current president of Ufip. But the Ministers of the Economy, Bruno Mayor, and Ecology, François de Rugy, asked them yesterday to amplify the movement by passing on the decline in oil prices on a daily basis on prices at the pump. Otherwise, they stand ready to crack down. "There is increased scrutiny by government departments that fuel distributors are passing on these price declines. There may still be sanctions for non-compliance with the competition, "warned François de Rugy this morning on Franceinfo. "When prices go up, you increase at the pump. It has to be both ways. The Total network told us that it had already made a decrease of 3 cents on gasoline and diesel, "said the minister, calling on the French to appreciate the gesture. "When prices rise by 3 cents, people say 'it's unbearable' and when it goes down, it says '3 cents, it's nothing'," he lamented.
• Can we expect the decline to continue?
At this moment, the markets react to Donald Trump's announcement of less severe sanctions than expected for Iran. By granting exemptions to certain countries (including China and India), the US president makes it clear that he no longer intends to immediately reduce Iran's exports of black gold to zero. "When we add the fact that Saudi Arabia and Russia have increased production since June, we understand that the bears are the pinnacle," said Stephen Innes, an analyst at Oanda. On the demand side, investors expect a slowdown because of the expected slowdown in global growth. However, over the long term, the trend should remain bullish. "All indications are that oil prices will remain high in the months and years ahead," confirmed Bruno Le Maire.