German Petrol Price Controls Raise Costs Despite Transparency Gains, Study Finds

German petrol price controls, introduced to protect motorists from rising oil prices, have increased average fuel costs, according to economists. Researchers from the ZEW Institute and the Duesseldorf Institute for Competition Economics found that the reform improved price transparency but failed to lower prices. Instead, drivers now have fewer chances to purchase cheaper fuel during the day.

Key Highlights

• German petrol price controls increased average fuel costs despite improving transparency
• Retailers gained five to six cents more per litre after the reform
• Drivers now have fewer chances to buy cheaper fuel during the day
• No significant effect was found on diesel prices
• Government continues to monitor the impact of the law

Impact of Price Control Law

In March, Germany mandated that petrol stations could only raise prices once per day at noon. The government aimed to limit the impact of soaring energy prices after Iran cut off about 20 percent of global oil and gas supplies in response to US-Israeli actions. The law was intended to shield consumers from price spikes.

However, the study found that the law increased retailers' gasoline margins by five to six cents per litre. Researchers compared wholesale and pump prices at 15,000 petrol stations. They observed that prices now spike at noon and fall gradually until the next morning. This pattern leaves fewer opportunities for drivers to buy cheaper petrol compared to before the reform.

Findings and Reactions

The economists concluded that the reform succeeded in making prices more transparent but did not reduce overall price levels. "If anything, it had the opposite effect," the report stated. The study noted that low-price windows are now easier to predict, but this comes at the cost of systematically higher midday prices.

Retailers, especially smaller and independent stations, gained an extra five to six cents per litre on petrol. The study found no significant effect on diesel prices. Researchers suggested this could be due to lower demand from diesel owners, faster price increases at the crisis onset, or prices nearing the psychological threshold of 2.50 euros ($2.94) per litre.

At a press briefing, economy ministry spokesman Daniel Grewe commented on the study. He said the findings are suggestive since the study did not analyze actual sales volumes at different times of day. "The study does not specify exactly what volumes are purchased at what price, but simply plots the price curve," Grewe said. He added that the law requires ongoing checks and that authorities will continue to monitor the situation.

Context and Ongoing Debate

The study's release comes as Chancellor Friedrich Merz's government faces economic challenges and internal disagreements over reform. The CDU and SPD coalition partners have differing views on how to address Germany's sluggish economy. The effectiveness of the petrol price control law remains under scrutiny as the government seeks solutions to rising energy costs.