Fuel prices (TERM 021) - Assessment published Jan 2011
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Transport (Primary topic)
Typology: Descriptive indicator (Type A – What is happening to the environment and to humans?)
- TERM 021
Key policy question: Are fuel prices sending the appropriate signals?
Since 1980 the real price of transport fuel (all transport fuels, expressed as the equivalent consumption in unleaded petrol, corrected for inflation to 2005 prices) has fluctuated between 0.75 and 1.25 Euros per litre, with an average of 0.94 Euros. Real prices per litre peaked in summer 2008 at around 1.25 Euros, but then fell by around a third later that year, largely due to a significant drop in the price of crude oil.. Since then, in 2009 and early 2010, real prices have recovered to just over one Euro per litre. The average real price in June 2010 was 1.04 Euros per litre, just 5% higher than the price in 1980, 0.99 Euros. As the price of fuel is an important determinant of the demand for transport and the efficiency with which fuel is used, it is clear that price is not currently countering the impact of growth on transport demand.
Road transport fuel prices (including taxes) in EU Member States
Note: Road transport fuel prices (including taxes) in EU Member States. Definitions: * ‘All petrol’ is a consumption-weighted average price of both leaded and unleaded fuel, corrected using energy-content to the equivalent amount of unleaded petrol. * ‘All fuel, unleaded petrol equivalent’ is a consumption-weighted average price of unleaded, leaded petrol and diesel, corrected using energy content to the equivalent amount of unleaded petrol. * ‘Nominal’ is the price with no adjustment for inflation. * ‘Real’ is the price corrected for inflation, using 2005 as the baseline year. * ‘Average, all fuel, unleaded petrol equivalent (real, weighted by consumption)’ is the consumption-weighted average of the ‘All fuel, unleaded petrol equivalent (real)’ line across the full time series.
Fuel price source 1980 - 1993. Quarterly values taken from original spreadsheet. http://ims.eionet.europa.eu/IMS/ISpecs/ISpecification20070821110939/full_spec
Fuel price source 1994 - 2005, Weekly values taken from Oil Bulletin. , http://ec.europa.eu/energy/observatory/oil/doc/time_series/time_series_country.zip
Fuel price source 2006 onwards Weekly values taken from Oil Bulletin: ,
While nominal prices of transport fuels have increased considerably, the real average price of road fuel in the EU (inflation corrected with HICP, reference year 2005) has increased by a lower degree during the last decade, apart from short periods of price increases influenced strongly by political instabilities. The price in June 2010 was 5% higher than at the start of the data series in 1980, but remains within around 30% of the average price of 0.94 Euros throughout the period.
In mid-2004, shortly after the accession states joined the European Union, average total tax levied on fuel in the EU-15 was around 40% higher than in the EU-12. In the third quarter of 2010, this gap had narrowed to just over 25%. Converging fuel tax rates within the European Union may impact upon road freight by reducing the advantage of cross-border refuelling although there is still significant variation between individual member states.
Currently (August 2010), the overall rate of tax on diesel is less than on petrol in all EU Member States; this has lead to diesel being cheaper than petrol for consumers in all Member States but the UK and Romania. This taxation strategy is followed despite evidence to suggest that the external costs of diesel vehicles are on average higher than those of petrol vehicles (see TERM25 ‘External Costs of Transport’). This has contributed to a shift from petrol to diesel vehicles in recent decades. In 1980, petrol accounted for about two-thirds and diesel for a third of fuel sales. More recently in August 2010, the share has reversed, with diesel accounting for just over two-thirds of fuel consumption. This trend can be explained by both a growth in road freight transport (relative to transport by passenger car), and a higher proportion of diesel passenger cars in the European fleet.
Fuel prices can be used to assess and explain developments in transport demand, as they are closely linked through price elasticities of demand. Changes in the price of fuels can lead to a change in the demand for transport and also has a significant impact in the longer term on the efficiency of vehicles bought by the user. Given that real fuel prices have, apart from short term fluctuations, remained relatively constant over a period during which there was considerable economic growth, it is clear that the price of fuel is not currently sending a strong, consistent message in favour of demand reduction and fuel efficiency.
provided by Directorate-General Energy (DG-ENER)
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