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AFCA publishes final report on sector inquiry into Austrian fuel market

In light of soaring prices in the fuel market, and the related burden on consumers and businesses, and in response to numerous complaints, the Austrian Federal Competition Authority (AFCA) launched a market inquiry into the Austrian fuel market in March 2022.

Early in July 2022, the AFCA published a preliminary report on its sector inquiry (see AFCA’s press release of 7 July 2022). All market participants affected were given the opportunity to submit statements on these preliminary results by 27 July 2022. Only two market participants submitted a statement, with the majority choosing not to. The two statements from these market participants included constructive feedback, but did not result in the preliminary findings having to be changed in any way.

The AFCA added an analysis of these statements to the final report on its sector inquiry. It also added a new chapter on the development of refineries’ operating costs, enabling more specific conclusions to be drawn with regard to refineries’ actual profit margins.

The AFCA may now use this final report to submit facts based on data to the Government, Parliament and the general public, allowing them to discuss the matter on the basis of the evidence.

Results of the inquiry

Based on the inquiry findings, there is no direct evidence of cartels or the abuse of market power. However, the final report, which now also includes a chapter on costs, suggests that refineries have posted strongly increased profit margins (gross margins minus operating costs) in the months since Russia invaded Ukraine.

The results of the sector inquiry show that the price rises at filling stations are primarily due to higher international price assessments for diesel and petrol. International price assessments serve as benchmark rates in supply contracts, ultimately determining wholesale and ex-refinery prices.

At the same time, however, since Russia’s invasion of Ukraine, oil companies’ refineries have also posted markedly higher profit margins, and filling stations were recording higher gross margins in March:

  • The operating costs reported by the oil companies for our sector inquiry suggest that refineries’ actual profit margins have risen to roughly the same extent as their gross margins since Russia’s invasion, against the backdrop of gas and electricity prices steadily increasing since 2021.
  • The wholesale prices for gas and electricity rose by about 600% and 160% respectively in the first quarter of 2022 compared with Q1 2021. During the same period, refineries’ operating costs, which include costs for gas and electricity, have risen by less than 1 cent per litre on average. This shows the marginal significance of gas and electricity prices compared with crude oil prices, which had grown by approximately 25 cents per litre over the same period of time. Against this backdrop, the AFCA considers it unlikely that operating cost increased substantially in the second quarter of 2022 as gas and electricity prices only climbed by some 40% and 20% respectively compared with the previous quarter.
  • The AFCA analysed whether the higher prices at the pump can be explained solely by developments in the price of crude oil. Its calculations show that, international price assessments decoupled from crude oil prices, with international diesel and petrol prices up 36 and 41 cents per litre, respectively, compared to the period before the Russian inavsion of Ukraine. Meanwhile, crude oil prices have only risen by around 22 cents per litre over the same period.
  • This stronger rise in prices for diesel and petrol at the pump, which cannot be explained by price hikes in crude oil (decoupling), led to gross refining margins tripling over the same period of time. While diesel’s contribution to gross refining margins increased by around 14 cents per litre, the increase in petrol’s contribution was about 20 cents per litre.
  • On 8 July 2022 the UK’s Competition and Markets Authority (CMA) published a report on its review of the fuel market, reaching similar conclusions in its calculations of refinery margins (see CMA, Road fuel review, published 8 July 2022). The CMA has meanwhile initiated a formal market study into road fuel, which will enable it to develop a more detailed understanding of how the market in the UK functions. If necessary, the CMA is legally entitled to take steps to strengthen competition.
  • At filling stations, signs of substantially increased gross margins were only found for March 2022. Gross margins in the subsequent months were only slightly higher than they had been before the war. However, other cost components such as higher transport costs and uncertainty in the market need to be considered when evaluating these slightly higher gross margins at filling stations.
  • The results of the inquiry in relation to filling stations suggest that higher fuel prices are not due to a lack of competition among filling stations but have been caused in particular by the surge in global oil prices and/or by the refineries. For cost cuts to be passed on quickly to consumers in future, fair competition continues to be important.
  • The issue of global prices extends beyond a purely national level. The AFCA is therefore cooperating with the European Commission in this matter.

An example of the impact on consumers:

Due to higher crude oil prices alone, consumers had to pay 13.20 euros more, on average, for a 50-litre tank of fuel in the first half of June compared to the period before the war. Additionally, consumers are paying 11.40 euros more for a tank of diesel and 12.60 euros more for a tank of petrol because of higher gross margins. All prices include VAT.

The final report can be downloaded from the following link (in German):