German Fuel Prices Hover Near Record Mark

Gasoline prices were still sky-high on Wednesday after many countries around the world reported record highs on Tuesday. Fuel in Germany, which topped the €1.20 ($1.45) a liter price barrier and recorded its highest fuel prices in over a decade on Tuesday, was still hovering around that mark a day later as prices in the United States continued to set new precedents.

In all, prices eased slightly around the world on Wednesday, a day after surging to levels last seen in 1990 in the run-up to the first Gulf War, amid jitters over U.S. gasoline supplies and violence in Saudi Arabia. A gun attack at an oil facility there over the weekend killed five people and sent shockwaves through financial markets at the start of the week.

The fallout was still being felt in Europe and especially in Germany where added tax does nothing to help in times of high prices forced upward by instability in countries responsible for the production of oil.

German motorists were forced into paying around €1.20 per liter for their premium fuel on Wednesday with petrol company Aral recording a slight drop in price from the week's high point with a liter in some stations costing 119.9 cents. The average price, taken from the company's 2,600 gas stations, set petrol at 117.9 cents per liter and diesel at 95.9 cents. Energy giant Shell estimated this week that the rise could push up the annual petrol bill for drivers in Germany on average by €100.

Calls for reductions in eco tax

The Automobile Club of Germany (AvD) called on the government to lower the eco tax on petrol in view of the record prices. "It is now a matter of pulling the emergency brake on the prices. Many people can't even afford to get to work," said spokesperson Jochen Hövekenmeier on Tuesday in a statement from the club's headquarters in Frankfurt am Main.

However, the German government sees no need to take action because of the high fuel prices. There is no reason for legislative measures concerning gasoline prices, "especially not with the eco tax," a spokesperson for the finance ministry told reporters on Wednesday.

Huge losses to revenue if prices cut

Around 70 percent of the price of fuel in Germany is made up of taxes and delivery costs. The tax on fuel amounts to almost 65.5 cents a liter and is not affected by changes in fuel prices. Regardless of the rise in price, the tax will remain set at that rate. On top of that, there is 16 percent value added tax. If the government were to lower the price of fuel, it would stand to lose €13 billion in income.

U.S. fuel prices were at all-time record high levels as motorists shared the traders' concerns that refiners will struggle to meet demand for fuel during the driving season that begins later this month when American motorists take to the roads to begin their summer vacations.

Demand for fuel causes concerns

The price of a gallon of regular unleaded gasoline for delivery in June leapt 4.38 cents to a record $1.3058 dollars. "All depends on what happens to the gasoline (stocks)," Commerzbank oil analyst David Thomas told German broadcaster N-TV. "If we see continued tightness in gasoline inventories, than gasoline futures will remain near their record levels."

"If we see a smaller than expected build or even a draw in gasoline stocks, demonstrating a high demand that supply cannot meet at the moment, then gasoline and crude prices will continue to go higher," said Thomas.

OPEC says there is no shortage

The fear that there will be a fuel shortage is an unwarranted one, according to the Organization of Petroleum Exporting Countries (OPEC). Although prices have soared recently, Purnomo Yusgiantoro, the president of OPEC, said the cartel's members were exceeding their agreed production ceiling by 1.5 million barrels per day (bpd).

At a meeting in March, OPEC agreed to cut oil output by one million bpd to reduce total production to 23.5 million from April 1.The excess production of 1.5 million bpd has however left the grouping's total production to 25 million bpd, Yusgiantoro was quoted as saying by the Indonesian state Antara news agency. Yusgiantoro, who is also Indonesia's energy minister, blamed the oil price increase in the world market on the recent terrorist attack in Saudi Arabia.