High diesel prices: At the expense of consumers

Diesel customers paid more for fuel than necessary in 2022. NDR-Research shows how an influential price information service apparently helped the diesel industry to make millions in profits – at the expense of consumers.

By Nils Naber and Antonius Kempmann, NDR

When a motorist in Germany drives to the petrol station, diesel of Russian origin often flows out of the tap. Although the EU decided months ago to end trade in Russian diesel, the embargo will not take effect until next year. In contrast, the embargo has apparently already arrived at the diesel price at the gas station. A reason is after NDR-Research by the price information agency Platts (S&P Commodity Insights), based in London.

Platts already excluded Russian diesel from the pricing model for north-west Europe in the summer of this year. This virtually reduced the supply, although the Russian diesel was actually still available on the market and is still there today. With this practice, Platts apparently fueled the sharp rise in diesel prices this year NDR-Research close.

Indices with “essential role”

Agencies like Platts collect information from diesel dealers every day and calculate a daily price per ton. From this, they form an index for a specific region. This index is an important guide for the market. “These price indexes are really the basis for everything that’s imported into Europe,” says Kevin Schaefer, general manager of Argus in Germany, a Platts competitor. Market participants wrote these indices directly into their long-term supply contracts. This meant they “played an essential role,” says Schäfer.

Because most of the trade in diesel runs on annual contracts. For example, a gas station chain secures a certain amount of diesel for the next year from a refinery or wholesaler. Since prices often fluctuate greatly, no fixed prices are included in the contracts in advance. Instead, buyers and sellers agree on the amount determined by an independent pricing agency, which is recalculated daily. In Germany, this is often an index from Platts.

Many market participants surprised

Diesel dealers who deal with this price index on a daily basis share in conversation with the NDR-political magazine “Panorama 3“This assessment. “Platts is by far the biggest price setter in the oil market,” confirms an oil trader who wants to remain anonymous. The price information on diesel is “very important and very present in the market”. The change in Platts’ diesel price index, i.e. the calculation of Russian diesel would have surprised many market participants.”It has never happened to this extent before,” says another dealer who also wants to remain anonymous.

“Without considering the available quantities from Russia, the prices have been higher,” says the trader. The sudden change in the basis for calculating the index in the middle of the year, i.e. in the middle of the term of the supply contracts, is unusual.

Platts confirmed on NDR-Request the change in the diesel index as of June 1st. The request for this was brought to Platts by market participants. The change in the index was also made public. In addition, new price information was offered, in which Russian diesel continues to be included in the assessment. How many traders actually use this new information is unclear.

Tangible consequences

In fact, the rise in diesel prices this year has many causes. Only part of the price increases can apparently be attributed to the changed index. But due to the large amounts of diesel that are consumed every day in Germany, even small price increases have noticeable consequences.

Sectors whose business model is based on fuels, such as the freight forwarding sector, are suffering from the rise in diesel prices. Carsten Pfaff, owner of Spedition Pfaff in Hamburg, fills up around 30,000 liters of diesel per week in his 55 or so vehicles. He notices price increases immediately. “The diesel prices are a very heavy burden on us,” says Pfaff.

This means almost 100,000 euros in additional costs per month for its operation alone. Although Pfaff can cushion the sudden increases somewhat, he can pass on parts of the fuel prices to his customers with protective clauses in his supply contracts. Nevertheless, the increased diesel price is exacerbating the already tense situation in the forwarding industry.

Pass costs on to gas station customers

The change in Platts’ price index appears to have led to increases in diesel prices that could add up to hundreds of millions of euros in additional profits for the diesel industry in north-west Europe, the show shows NDR-Research. Platts stated that it could not make any statement about additional profits and referred to the companies involved. These in turn referred to the request of NDR mostly on their trade secret.

The dealers who only covertly use the NDR “I would say those who process crude oil: the refiners, manufacturers of the finished products, processors,” says one trader. They could continue to buy cheap Russian raw materials and sell them at higher prices. Apparently, it was the people at the pump who were left with the costs. “Ideally, the chain succeeds in passing this on to the customer,” says the retailer.

antitrust issues

Lawyer Prof. Christian Kersting from the University of Düsseldorf raises antitrust questions about the change in the index if this is due to the operation of several oil companies: “If you can determine that this was done in a coordinated manner, then I’ll do a very big one in terms of antitrust law question mark behind it,” says Kersting. The answer to these questions could only be provided by an examination by the Cartel Office. The cartel office wanted to oppose the NDR not comment on the research. It only said it was looking at price information agencies as part of an ongoing investigation. It is not yet clear when this will be completed.