Why is gasoline more expensive than crude oil?

High fuel prices and a strong dollar account for 2/3 of the fuel price increase in Poland. The rest is the result of increased demand for travel, limited refinery capacity and restrictions on fuel exports by China. This is why fuel is more expensive than Petroleum. And ahead of us are more impulses to increase prices: holidays and the hurricane season in the USA.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Why is gasoline more expensive?

Fuel prices at gas stations depend on the price of crude oil, almost every Polish driver knows this relationship. Fuel prices are quoted in dollarswhich means that the price of oil for Polish consumers is also influenced by the zloty exchange rate against the dollar. However, careful observers have noticed that the price of gasoline in Poland has recently increased much more than it would result from the increase in the price of crude oil and the depreciation of the zloty. We observe this process all over the world, where gasoline is more expensive than oil prices.

On February 1, a reduction in VAT and excise duty came into force, at which the price of 95 petrol fell to around PLN 5,30 per liter, today the price is around PLN 7,90 per liter, which means a price increase of 49%. At the same time, the price of a barrel of brent oil increased 22 percent. (from 90 to 110 dollars), and the zloty weakened against the dollar by 11 percent. (from PLN 4 to PLN 4,44 / dollar). These two factors, therefore, account for only 2/3 of the current increase in the price of gasoline.

What else influences the price?

The remaining 1/3 is the effect of other factors. The most important of them, which contribute to an additional increase in the price of fuels in the world, are the increased demand for travel (car and air), the limited processing capacity of refineries, which are not able to meet the growing demand, and restrictions on the export of finished fuel by China, which way they want to reduce the carbon intensity of their own economy. These factors have already driven up the price of gasoline, and this is not the end yet, as holidays in the Northern Hemisphere are just beginning. In the US, on the other hand, we face a hurricane season, which affects areas where more than half of American oil is processed.

The beneficiaries of these increases are refineries and fuel companies. Orlen in the first quarter of this year. generated a record profit amounting to PLN 2,8 billion, i.e. PLN 1 billion more than in the previous year. Also in the USA, refineries from Marathon (MPC) to Valero (VLO) are gaining. Rising fuel prices are a serious problem for household budgets, as transport expenses account for 9,5 percent. share in the basket of inflation by the Central Statistical Office (in the US it is only 4%). It also increases inflation expectations, which then translate into actual inflation.

Anti-inflationary shield not only in Poland

Fuel prices are also a political topic. In Poland, the government introduced an anti-inflation shield, consisting in a reduction in excise duty and VAT. However, prices have risen by almost 50 percent. despite its introduction. In the US, twenty states lowered their fuel taxes to lower gasoline prices. By contrast, the federal fuel tax of 18,4 cents per gallon has not changed since 1993.

Americans travel by car twice as far as Europeans, an average of 14. km per year (versus 7 thousand km in Europe). In addition, American cars have about 20 percent. lower average fuel efficiency. Efficiency in Europe is better (+ 15% on the average), but taxes are higher. Nearly 50 percent fuel prices in Great Britain and 60 percent. fuel prices in the EU are taxes.