How far will the drop in fuel prices go in France?

Since hitting a record high seven weeks ago, fuel prices have started to decline steadily. Week after week, the price per liter of petrol and diesel has lost a few cents. According to the Ministry of Ecological Transition monitoring on Friday 5 August, the average price of diesel was 1.83 euros/litre, or 3.9 cents less than last week. For the Super SP95-E10, the drop was 1.4 cents in seven days, with a pump price averaging €1.79 per liter. As the long-awaited monthly forecasts of the Organization of the Petroleum Exporting Countries (OPEC) are released this Thursday, 20 minutes tells you why and how fuel prices fluctuate, and the roller coaster ride continues.

Why are prices falling?

There are several factors behind this slow decline. First, if it falls, then because it exploded with the war in Ukraine. The announcement of an embargo on Russian oil sent chills in a particularly volatile market. If it hasn’t gone up, it’s partly thanks to the government’s exceptional discount of 15 euro cents per liter of petrol at the pump. This has been extended to August 31st, so it’s not going up for now!

Third reason, the fall in the price of Brent, this North Sea deposit whose price per barrel is used by many people to fix the amount of crude oil on the stock markets. “Spot Brent price fell $22/b between June 17 ($127/b) and August 5 ($105/b), hitting its lowest level in nearly six months,” the statement said Report. 20 minutes the Ministry of Ecological Transition. The reduction in its costs can be explained “by the agreements between the OPEC producer countries to increase their production,” explains Carine Sebi, economist and coordinator of the “Energy for Society” chair at the Grenoble School of Management.

Finally, the expert cites a fourth factor: “the reduction in the margin made in refineries between the price of crude oil and the refined product”. Again, the Ministry of Ecological Transition monitored the evolution of the Brent refining margin, which was €33 per tonne in the week of January 7th, to peak at €193 in the week of April 29th and is now €62 per ton to rise ton. The ministry explains this gradual reduction in refining margins with “the volatility in crude oil prices, the increase in refinery production and the fall in gasoline demand”.

How long will it take?

One thing is almost certain, this decline won’t last forever (or else gas would end up being free). This could end shortly after the start of the school year. For Carine Sebi, if the government plans to double the rebate at the pump in September and October “because it expects an increase in this very sensitive market”. And sensitive to the smallest movements: one-off ones like “China’s expected economic recovery, which will increase demand and tighten the market,” but also seasonal ones like “the arrival of winter and countries’ need for oil for heating,” says the economist .

For its part, the Ministry of Ecological Transition is concerned about “the impact of the economic sanctions imposed on Russia, the production difficulties of OPEC + member countries or the expectation of an imbalance in the oil market at the end of 2023”. International Energy Agency (IEA)”.

Could we see the same records as last May?

It’s not impossible for Carine Sebi. “The state is trying to take the pill with its discount, but until when? asks the woman for whom, unfortunately, the government is doing the opposite of what it should be doing. “With this help, we are investing in hydrocarbons rather than using the money for zero-emission alternatives that would allow us to break this dependency on hydrocarbons.”

Conclusion: On the day when the state can no longer reach its purse, the backlash at the pumps should hurt.