German agency warns oil firms; will not intervene over E10 pricing

26 May 2011 17:27  [Source: ICIS news]

LONDON (ICIS)--Germany’s federal competition agency will prevent further concentration in the country’s downstream gasoline and diesel market amid complaints about high petrol prices, it said on Thursday.

However, the Bundeskartellamt, which probed the market in a three-year study, said that oil firms are not illegally fixing prices outright. As such, the agency cannot impose price controls or take other steps against the firms. 

Also, the Bundeskartellamt will not take steps against the oil firms over the troubled launch of 10% bioethanol blended gasoline (E10) this year, which led to surging fuel prices at the pump, it said.

The introduction of E10 is based on political decisions outside the agency’s purview, it said.

The German market is dominated by five large oil firms – BP, ConocoPhillips, ExxonMobil, Shell and Total – which form an oligopoly with no meaningful competition, the agency said.

As a result, Germany’s drivers are paying “excessive prices” for their gasoline and diesel, the agency said.

Andreas Mundt, the president of the Bundeskartellamt, said that with the oligopolistic market structure, Germany's retail petrol prices are highly transparent. As such, there is no need for companies to get together to agree on pricing, he said.

In practice, usually one of the oil majors initiates a price hike and, within hours, the other oil firms will match that move. However, such behaviour is not illegal under Germany's competition laws.

“The companies can communicate without words, and this leads to excessive prices,” Mundt said.

The Bundeskartellamt, for its part, will closely follow the market and take action against companies if it has evidence that they are infringing competition laws, Mundt said.

However, it is up to lawmakers to decide whether “regulative interventions” in the market could improve the situation for drivers.

Germany’s refining industry trade group, MWV, said a key reason for the country’s high fuel prices taxes.

In fact, before taxes and other levies, Germany’s fuel prices are among the lowest in Europe, the group said.

Elmar Baumann, general manager of VDB, Germany’s biofuels trade group, said one reason for the lack of competition is the high tax on biodiesel, which has effectively destroyed that market and forced many smaller producers to shut their plants, thus further strengthening the oil majors.

Ferdinand Dudenhoffer, a professor at the University of Duisbug-Essen’s auto-industry research centre, said the underlying reason for the high fuel prices is the OPEC cartel, which lies outside the purview of German competition authorities.

For more on Shell, Total and other producers, visit ICIS company intelligence
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By: Stefan Baumgarten
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