While the supply provided by oil-producing countries is lower than demand, prices at the pump continue to rise. And the situation is not expected to improve by the end of the year.
Since the start of summer, prices at the pump have been soaring, to the great dismay of French consumers. Unleaded 98 is the most expensive fuel at service stations in France. It passed a symbolic milestone, with a price of 2.01 euros per liter on September 15, an increase of 13 cents since July 7. It thus returns to its April level.
But unleaded 95 and diesel are not spared. Since the beginning of July, the different fuels have seen increases between 9 and 16%. Diesel, the most consumed fuel in France, suffered the greatest increase. Falling back to 1.66 euros per liter in May, it jumped to 1.94 euros per liter on September 15, an increase of 28 cents. To find prices this high, you have to go back to August 2022.
Although prices are climbing, they remain far from the records reached in March and June 2022, a few months after the start of the war in Ukraine. On March 11, 2022, diesel reached a record price of 2.14 euros. In June 2022, unleaded 98 cost 2.20 euros per liter, despite a government rebate of 18 cents, implemented from April 2022 to the end of December 2022.
A possible decline at a standstill
How can we explain such an increase in pump prices? The member states of the Organization of the Petroleum Exporting Countries (OPEC) have decided in recent months to voluntarily reduce their production, in order to maintain high prices. “OPEC countries constantly adjust their production. When they fear that demand is too low and that there is excess supply, they turn off the tap”explains Olivier Gantois, president of the French Union of Petroleum Industries (Ufip).
Saudi Arabia announced in July a reduction in its production by one million barrels per day and intends to continue this policy until the end of December. Russia also reduced its production by 500,000 barrels per day in August and by 300,000 in September. On September 18, the price of a barrel reached 94.86 dollars, or 88 euros, a record since November 2022.
This new increase is taking place while fuel prices seem to have stabilized at a high plateau since the start of the year.
“The first reason for this situation is the increase in global demand for crude oil, particularly in Asia.”
Olivier Gantois, president of the French Union of Petroleum Industriesat franceinfo
Driven by their demographics and their growing standard of living, India and China are pushing up overall demand and thus pushing up prices. Another factor that boosts prices: the continuing war between Ukraine and Russia. “Markets are nervous when Russia, the world’s second largest producer, is at war”explains the president of Ufip.
“As long as Russia is at war and global demand continues to rise, prices will remain high.”
Olivier Gantois, president of the French Union of Petroleum Industriesat franceinfo
Another reason given concerning diesel: the drop in stocks in the United States and especially “restrictions in the availability of certain refineries, which have created tensions on the market and increased the price of diesel”adds Olivier Gantois.
Help for the most modest
To cope with these increases, Emmanuel Macron announced on Sunday September 24 that compensation of 100 euros per car per year would be paid for the lowest-income workers. This measure should concern 5 million French people. The executive is also counting on the goodwill of refiners. In the wake of the Head of State’s announcements, Prime Minister Elisabeth Borne will bring together all the players in the sector on Tuesday in the hope of convincing them to sell fuel at cost price.
The government had already suggested that distributors sell their fuel at a loss. In vain. TotalEnergies and the main leaders of mass distribution had announced that they refused to do so. Patrick Pouyanné, CEO of TotalEnergies, however declared that the system capping fuel at 1.99 euros in the oil giant’s stations would be maintained “as long as prices remain high”. The government, for its part, has ruled out a new rebate.