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ECONOMY

EXPLAINED: Why are fuel prices increasing faster in Austria than elsewhere in the EU?

The price of petrol in Austria has risen by 46 cents in the last two weeks alone - faster than anywhere else in the EU. Politicians and experts are now calling for an industry-wide investigation.

EXPLAINED: Why are fuel prices increasing faster in Austria than elsewhere in the EU?
A photograph taken on March 8, 2022 shows a board with prices of gasoline and diesel at a petrol station, in Essen, western Germany. (Photo by Ina FASSBENDER / AFP)

In no other European Union country have the prices of the Eurosuper petrol risen as sharply since the end of February as in Austria, according to analysis by Verkehrsclub (VCÖ), Austria’s Transport Association. 

The association has called for the country’s Federal Competition Authority (BWB) to look into the rising prices. 

According to the VCÖ analysis, a litre of Super on March 14th cost €1.987, some €0.46 more than two weeks before the end of February. 

When it comes to diesel, Austria had the second highest price increase in the EU after Germany (€0.57), with €0.50, the VCÖ said.

However, the reason is not due to taxes, as most European countries have not made any changes to fuel taxation and taxes in Austria are lower than in most other countries, VCÖ said.

So why are fuel prices increasing? 

Fuel prices have been rising worldwide, not just in Austria or Europe. 

They are usually determined by a combination of the price of crude oil in international markets, the costs for processing in refineries, distribution costs, profits, taxes, and any possible government interference.

READ ALSO: UPDATED: How to save money on fuel costs in Austria

The fundamental economic law of supply and demand plays a significant role when it comes to international prices. As the war in Ukraine decreases supply, especially as sanctions hit oil-rich Russia, and concerned countries increase demand, prices get higher. 

Additionally, global markets trade in US dollars. With the euro losing its value against the currency, the prices have increased compared to a year ago. 

These factors affect every country, with the eurozone facing historic inflation spikes over the past few months. 

Why are prices higher in Austria?

Other factors that affect oil prices are domestic. The explanation for why prices are higher in Austria than in other countries concerns a mix of processing and distribution costs, company profits, taxes and government policies. 

One of the main suspicions in Austria is that domestic oil distributors have not passed on fluctuations in international prices when they drop to keep profits high. 

READ MORE: Cost of living: Seven tips to save money in Austria

So, when prices go up internationally, domestically, they also increase. However, when they drop by a few cents, they would stay the same in Austrian petrol stations, increasing company margins.

Green vice-chancellor Werner Kogler spoke of these suspicions on Twitter: “although the price of oil drops for the third day in a row, the prices at the stations remain the same.”

“There is a suspicion that a few oil companies are earning big money at the expense of the people”, he said.

“We will therefore contact the Federal Competition Authority, which could carry out an industry investigation as a first step. If things aren’t going right and corporations make a deal out of the war, we have to intervene,” the vice-chancellor warned.

Austria has only three major mineral oil companies, which would allegedly make it easier for a price-fixing deal to happen. 

Policy changes

The federal government has been considering several measures to halt increases in inflation and fuel prices. 

In Hungary, the government has set a maximum fuel price, making Austrian petrol more expensive in comparison. Similar measures have been taken by neighbouring countries. 

Austria has considered a fuel subsidy and reducing taxes, short-term solutions to assist the general population, while a price-fixing competition could take months.

The Transport Association has also brought more long-term suggestions, besides the call for a closer investigation on prices.

The VCÖ wants the government to quickly take measures to reduce the oil dependence on transport. It also sees the need for policies that would make it easier for the population to be mobile in an energy-saving manner, such as better public transport.

The associations also called for a speed limit of 100km/h instead of 130km/h on motorways as a “quickly implementable measure which saves money”.

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MONEY

Bread, butter and veggies: The items getting more expensive in Austria

The purchase price of flour has risen by around 70 percent, which means the cost of bread, cakes and pastries in Austria are set to rise, alongside steep increases for fresh and canned vegetables. Here's what you need to know.

Bread, butter and veggies: The items getting more expensive in Austria

The war in Ukraine and a ban on the export of wheat in India is driving up the cost of wheat flour around the world, with bakers in Austria warning they have no choice but to raise prices.

According to the Chamber of Commerce, there is also a paper shortage for packaging that is used for most baked goods, adding to further pressure on bakers.

Reinhard Honeder, Chairman of Bakers for the Chamber of Commerce, told ORF: “I believe that every colleague must raise their prices if they have not already done so.”

READ ALSO: The essential products that are getting more expensive in Austria

However, the rising cost of wheat flour is not expected to hit Austria as hard as other countries because Austria is “self-sufficient” when it comes to wheat, due to domestic agriculture capabilities.

Honeder says Austria has enough wheat to feed the population and believes this should stop baked goods from becoming unaffordable. 

In Upper Austria, there are around 288,000 hectares of arable land and wheat is currently grown on almost 46,000 hectares, according to Agrarmarkt Austria.

However, global wheat production is forecast to be 774.8 million tonnes for 2022/2023, which is 4.5 million tonnes less than in 2021/2022.

Farmers are also being hit with rising costs for fertiliser and machinery, leading to ongoing increases in the global price of grain.

FOR MEMBERS: Cost of living: 45 ways to save money in Austria

The cost of groceries (Lebensmittel) also on the rise in Austria

Bread isn’t the only staple food product that is becoming more expensive in Austria.

Der Standard reports that the cost of a bell pepper (Paprika), butter and tinned tomatoes are also rising sharply. 

When comparing prices from April 2021 and May 2022, one red pepper (from Austria) is up by 67 percent to €1.49, a 250g pack of Clever butter is 79 percent more at €2.49, and a can of Clever chopped tomatoes costs 20 percent more at €0.47. 

Inflation has been rising in Austria for the past year and hit 7.2 percent in April – the highest rate in Austria since October 1981 when the Gulf War led to an increase in oil prices.

The cost of food is a big driver in the rise in inflation with the average weekly shopping basket costing 14 percent more than last year, according to Statistics Austria.

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