Outlook: Prices and Supply
The Middle East conflict – triggered by the massive Hamas attack on Israel – has so far had little impact on crude oil prices. After a brief rise, other factors prevailed and pushed the Brent crude oil price level back down to well below $80 per barrel at the beginning of December. Even the recent OPEC+ meeting where voluntary output cuts were agreed could not change this.
For anyone needing to fill up with fuel, this was initially good news. According to the German Automobile Association (ADAC), average prices at petrol stations continued to fall through to the end of November. Diesel remained relatively expensive, however, sometimes even costing more at the pump than petrol.
This cannot really be entirely explained by the development of crude oil prices. Germany has always relied on diesel fuel imports, as domestic production cannot meet demand. In 2022, some 12.5 per cent of demand was still met by Russia. In response to the war in Ukraine, however, the EU – and thus Germany as well – stopped importing refinery products such as diesel, gasoline and lubricants from Russia on 5 February 2023.
No bottlenecks have yet resulted, as the shortfall has been offset by supplies from other countries.
However, since the end of October reports have been circulating warning of a diesel shortage in northern Europe. This could hit Germany particularly hard. Problems at the Bayernoil refinery are one reason for this. After a fire there in early October, diesel production was largely shut down, primarily impacting southern Germany. The effects are likely to be felt beyond there, however, especially since diesel belongs to a category of fuels known as "gas oils", which also includes heating oil. In the event of a cold winter, this would result in increased demand for gas oil and would further exacerbate the shortage of diesel fuels. The situation is likely to ease as soon as one of the two parts of the Bayernoil refinery can begin production again.
Another positive factor is that the PCK refinery in the Brandenburg town of Schwedt once again achieved a capacity utilisation rate of 80 per cent in the third quarter of 2023, after having operated at only 60 per cent in the first half of the year.
A recession-related decline in diesel demand could also ease the market. According to the German Association of Freight Forwarding and Logistics (DSLV), transport demand has declined sharply in various sectors such as construction.
In other words, the current situation does not provide any reason for panic or to assume that petrol stations could soon run out of diesel or that prices will shoot through the roof.
So where do we go from here?
The experts – and this should come as no surprise – are not in agreement on this point. In its new annual report, the Organization of the Petroleum Exporting Countries (OPEC) forecasts oil demand to increase to 116 million barrels per day by 2045.
In its current World Energy Outlook, the International Energy Agency expects oil demand (excluding biofuels) to peak at 102 million barrels per day by the end of the decade due to political efforts to curb fossil fuel consumption
However, the increase in the CO2 price from 1 January 2024 will obviously be another driver of prices in the logistics sector, especially in the case of Germany. The industry is already coping with the 1 December 2023 increase in tolls due to CO2 emissions. Barring an unanticipated crash in oil prices, costs in the industry are not likely to come down.