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How falling fuel costs could slow down inflation in Germany

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How falling fuel costs could slow down inflation in Germany
A woman fills up her car at a service station in Neuhausen auf den Fildern in Baden Wurttemberg. Photo: picture alliance/dpa | Marijan Murat

Following record-breaking highs for diesel and petrol prices in Germany last year, gas station prices have fallen dramatically in recent months. If the trend continues into March, this could even impact the inflation rate.

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One year after the extreme price increases at the petrol pumps following Russia’s invasion of Ukraine, fuel prices in Germany have partially normalised. Although they are still at a high level in a long-term comparison, they are far below the prices of a year ago and, according to experts, are likely to become cheaper in the coming months.

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On March 7th, 2022, the nationwide daily average cost for a litre of Super E10 petrol and diesel exceeded €2 for the very first time. This was followed on March 10th by an all-time high price for diesel at €2.321 per litre on a nationwide daily average. On March 14th, the price for E10 petrol reached a record level of €2.203.

READ ALSO: Germany sees 'highest fuel prices on record' in 2022

Prices are currently well below this. According to figures from ADAC, in February, both E10 premium gasoline and diesel cost €1.754 per litre on a monthly average across Germany. If the prices remain similar in March, diesel would be around 18 percent cheaper and premium gasoline just under 15 percent cheaper than in the same month last year.

This would be such a significant difference that it would even show up in the inflation rate.

ADAC fuel market expert, Jürgen Albrecht, told the German Press Agency that, "if the competitive forces work and nothing extraordinary happens," fuel prices in Germany could even get a bit cheaper in the next few months. 

For diesel in particular, which remains at a relatively high price point on a long-term comparison, there is scope for price reductions, Albrecht said. "The price difference between diesel and gasoline is still too small," he said.

Interestingly, despite the high fuel prices, no less fuel was consumed in 2022 in Germany than in previous years. The annual figures on fuel deliveries recently reported by the German Federal Office of Economics and Export Control (BAFA) even show an increase in gasoline consumption compared with the pandemic years 2020 and 2021.

Prior to the pandemic, however, consumption was significantly higher for both fuel types.

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