High fuel prices and the amendment to antitrust law: Don't rush, Mr. Habeck!

Created: 04/03/2022, 06:44

By: Prof. Dr.

Justus Haucap

Prof. Justus Haucap is director of the Düsseldorf Institute for Competition Economics (DICE) at the Heinrich Heine University in Düsseldorf.

© Bruckmann/M.

Litzka/DICE

At the gas station, fuel prices are high - although oil prices have recently fallen again.

Economics Minister Robert Habeck (Greens) therefore wants to strengthen the rights of the Cartel Office.

The step is overdue, writes Prof. Justus Haucap in the guest article.

But first the supervisors would have to take a close look at the competition among German refineries.

Putin's war of aggression in Ukraine has caused energy prices in Europe to rise dramatically.

The gas price had meanwhile risen by around 40 percent, the same applies to the oil price.

As a result, fuel prices at the gas station have also skyrocketed.

Politicians reacted hectically.

There are no fuel vouchers, but the tax on petrol is to be reduced by 30 cents per liter for three months and by 14 cents on diesel.

There is also an energy price flat rate of 300 euros in the form of a higher income tax exemption, a 9-euro public transport ticket for 90 days and 100 euros for Hartz IV recipients.

The relief package offers something for everyone.

The whole thing is financed by additional government debt, which our children or grandchildren will then be able to repay at some point.

The relief package for us is therefore also a burden package for future generations, which we should be aware of despite all the joy about relief today.

The costs of our failed Russia policy of the last 20 years are partly borne by our children because we do not want to bear the consequences ourselves today.

High fuel prices: Habeck wants to strengthen the rights of the Cartel Office

Economics Minister Habeck also wants to strengthen the competences of the Federal Cartel Office in this context.

The filling stations should not only report their sales prices to the office in real time, but also transmit data on the quantities sold.

Exactly what this is supposed to do is not clear.

The office then finds out whether more or less fuel is being used.

Statements about a possible exploitation of market power can hardly be derived in this way.

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High fuel prices and antitrust law: Widening gap between crude oil prices and pump prices

So how can you determine whether the mineral oil companies are using the current crisis to make additional profits in violation of antitrust law?

In fact, the spread between crude oil prices and fuel prices has increased over the past three weeks.

However, this range has also fluctuated in the past and has by no means always been constant over the past two decades.

In this respect, fluctuations in profit margins are nothing unusual.

A possible explanation for the current increase is that the oil companies are raising prices in the face of a possible oil and gas embargo or the risk of a possible supply stop by Russia in order to curb demand today and to fill their tank farms more.

This theory is also supported by the fact that the range for diesel prices has risen particularly sharply.

Because about a third of German diesel imports come from Russia, so diesel would be more affected by an embargo than petrol.

High fuel prices and antitrust law: cooperation balance between oil companies?

However, that is not the only explanation: It is also possible that the competitive pressure among the oil companies has eased because a new balance of cooperation has emerged among the oil companies.

Internationally, there are definitely examples that extraordinary events in oligopolies can increase the willingness to cooperate.

It would then be plausible that such a coordination between the refineries in Germany would arise.

In Germany there are twelve refineries for fuels, which are closely intertwined and are largely owned by the large mineral oil companies.

Coordination is much easier here than between the approximately 15,000 petrol stations.

The focus of the Cartel Office should therefore initially be on the refineries.

If the refineries increase their wholesale prices for gasoline and diesel, this almost automatically leads to higher prices at the pump without the need for the coordination of the many filling stations.

Above all, the petroleum companies can ensure by raising prices in the refineries that the independent petrol stations and regional chains also follow suit, because they also obtain most of their fuel from the refineries of the petroleum companies.

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High fuel prices and antitrust law: sector inquiry is overdue

For this reason, the antitrust law amendment planned by the Economics Minister also provides that in future refineries will also transmit price and quantity data to the Federal Cartel Office.

In principle, targeting the twelve German fuel refineries more closely is also exactly the right thing to do.

However, the Cartel Office could have done this long ago.

As early as 2012, the office had announced a so-called sector inquiry into refineries in Germany, but then discontinued it without justification.

The office could finally catch up on such an investigation.

Then we would also have a solid basis for making decisions about any amendment to antitrust law.

High fuel prices: Habeck should not frantically push through antitrust amendments

It is not unusual for price increases to be observed in times of great uncertainty and the threat of embargoes.

The Economics Minister would therefore be well advised not to frantically push through an amendment to antitrust law, but to prepare it sensibly - ideally with recourse to a sector investigation of refineries by the Federal Cartel Office.

About the author: Prof. Justus Haucap is director of the Düsseldorf Institute for Competition Economics (DICE) at the Heinrich Heine University in Düsseldorf.

From 2006 to 2014 he was also a member of the Federal Government's Monopolies Commission, four of which as chairman (2008-2012).

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