Fuel prices have been very turbulent in recent months. After a significant drop which led to the lowest prices of the decade, we are now faced with the highest prices in history. Drivers are therefore starting to worry about transport costs. Today, we'll take a look at the situation in the Czech Republic and neighboring countries, and share some tips on how to save money on fuel.
First, let's do some math. You've probably noticed in recent months that, in addition to the prices of petrol and diesel, the prices of crude oil and fuel taxation have also gone up.
A closer examination reveals that although the price of the final product is largely based on the cost of crude oil as the basic raw material, many other aspects substantially increase the final sum.
At the outset, you may be in for a bit of a shock. The price of crude oil (petroleum) accounts for less than half of the final price of fuel. At the same time, however, petroleum is the main component that influences the price of the final product (or rather, it is the least price-stable component and therefore constantly causes shifts in the price). If the price of petroleum rises, it will soon affect the prices we see at our local gas stations. However, the rise and fall are not in a one-to-one ratio. The rise in petrol prices is, therefore, slower than the rise in petroleum prices. Conversely, if the price of crude oil falls by a few percent, the price of the final products will decrease relatively less. This is because some of the other items that contribute to the final price of fuel are not variable, but fixed.
What is the price of oil based on? The price of oil is determined by world markets. Unfortunately, oil production is not purely a market environment, as the commodity is found in very concentrated quantities, and only in certain parts of the world. Countries that are bursting with oil (OPEC countries, the so-called 'oil cartel') deliberately increase or decrease the volume of production, and thus virtually control the world oil prices (as they control the supply side of the oil market). However, the price of oil also fluctuates as demand for raw materials rises or falls, and world economic and political events also play a certain role.
We should also not neglect the influence of exchange rates. Oil is traded in US dollars and given that the dollar has appreciated significantly against the euro and the koruna in recent months, this aspect also has an impact on the rise in fuel oil prices at our gas stations.
Another essential component of the final price of fuel is the cost of production. Refineries produce petrol or diesel (and of course many other petroleum products) from crude oil. This production comes at a cost, be it in terms of wages or the technology and energy used. Of course, refineries do not do this activity for free, and they add a margin to the oil.
This component in the price of oil products is largely fixed, and its share of the final product, therefore, changes over time (when the price of oil falls, the share of production costs rises in relative terms, and vice versa). In general, however, it represents around 10 % of the final price.
Both the crude oil and the finished fuel have to be transported to the place of processing, or later, to the place of sale. This is obviously not free, so transport costs are also reflected in the final price of the product. However, these are usually lower percentages of the final fuel price.
Of course, petrol stations also have costs associated with the sale of fuel. A petrol station has to be built and maintained. Buying or renting land along major road routes is certainly not a cheap affair. In addition, petrol stations must meet strict regulations to ensure that there is no spillage of petroleum products into the environment. We must not forget labour costs either. And, of course, petrol station chains are for-profit organisations, and therefore have a margin on fuel.
Higher margins are usually enjoyed by petrol stations in large cities and along highways. However, there are also well-known chains that keep their margins - and thus the price of petrol and diesel - deliberately low. Since the quality of fuel is strictly monitored (not only) in the Czech Republic, their fuels should not be in any way defective.
Beware, however, that in the Czech Republic you can fill up your tanks with three types of fuel - additive-free, additive-treated and premium. Apart from their composition, they differ in price by a few korunas. Sometimes it can be more profitable to get the more expensive additive-free or premium fuels. The result is lower consumption and lower costs per km of driving due to better engine performance.
It is quite simply a business strategy. For end consumers, loyalty fuel cards from a particular gas station chain can help save valuable pennies, while for companies it may be more profitable to use third-party business fuel cards.
A surprisingly significant item in the final price of fuel is taxation, the first and foremost being excise duty. Excise duty is fixed, and in the Czech Republic, it amounts to approximately CZK 10 per litre of fuel (in the case of diesel it is slightly less and in the case of petrol it is slightly more). The specific amount and calculation can be found here.
Excise duty varies from state to state. The Czech Republic temporarily reduced the excise duty on petrol and diesel in mid-2022 to provide relief to citizens and businesses at the time of rising prices. The state can afford to do this as fuel is taxed once more on its side.
The second component of the final price of petrol and diesel is the value-added tax. In the Czech Republic, value-added tax is currently 21%. Of the prices you see at a petrol station, excise duty and value-added tax currently account for around half of the price of both petrol and diesel!
Businesses and entrepreneurs who are VAT payers have the advantage of being able to deduct VAT on fuel used for business purposes, so this item is not reflected in their costs. On the other hand, the administrative costs associated with the VAT declaration process are rising. Some countries have gotten rid of VAT on fuel completely, even for end consumers, as part of a temporary strategy to reduce fuel prices.
So, if you refuel frequently in your company and the company is a non-VAT payer, consider whether it might be more advantageous for you to become a VAT payer.
More information on VAT refunds
With the outbreak of Covid-19, the price of oil has fallen to record lows. Briefly, there was also a paradoxical situation where the supplier was willing to pay you to take the oil away. However, this only applies to wholesale customers.
As a result, however, the price of fuel in the Czech Republic fell to almost CZK 20 per litre. But then prices took a sharp turn in the opposite direction. Global economic and political instability is driving the price of oil upwards and in 2022 we can see prices exceeding a record CZK 50 per litre of petrol at our petrol stations.
The Czech government has responded to the situation by cutting excise duty from 1 June 2022 to 30 September 2022, which should result in a price drop of around CZK 1.50.
Towards the west, the situation is more or less similar, and no significant savings can be made on fuel. This is true for Germany, Austria and other countries. For an up-to-date overview and comparison of fuel oil prices in the individual countries, click here.
Some countries have reacted to the rapid price rise with massive state intervention measures. For example, Poland has temporarily abolished VAT, and Hungary has capped fuel oil prices. However, these are solutions that are not sustainable in the long term. Nevertheless, you can take advantage of them if you live in border areas or if you have to travel through these countries. In such situations, it makes sense to plan out not only your route, but also where you refuel. Eurowag's corporate solution can help you with this.
Unfortunately, prices in the Czech Republic and neighbouring countries cannot be expected to fall significantly in the coming months. For that reason, you need to find other ways to reduce your transport costs.
The seemingly easiest way is to just stop driving. However, this is only an option for small journeys around town or in places with good public transport. In most cases, using your own vehicle is unavoidable. At such times, more prudent driving may be recommended first of all.
If you like a sharper ride, you can probably reduce your consumption by at least 10% by driving more smoothly and at lower speeds. Ideally, choose motorway routes and drive smoothly at around 100 to 120 km/h (in the case of cars). However, trucks or buses can also reduce consumption by driving more smoothly.
We should also think of the smaller details. Bad tyres can cause higher fuel consumption, whether they're the wrong type (e.g., using winter tyres in summer) or if they are incorrectly inflated. If the tyres are not in top shape, the result is more friction against the road, which means you need more fuel to maintain speed.
Speaking of friction, remember air resistance as well. Roof boxes, bike racks and other accessories on the outside of the car interfere with the aerodynamics of the car and can greatly increase fuel consumption. The same is true for a trailer.
Try to reduce the weight of the car. Are you carrying unnecessary cargo? Empty the boot. If you don't usually drive far from home, you can also remove the spare tyre.
Reducing air conditioning use (by installing window screens) or turning off infotainment displays while driving can also save valuable tenths of a litre per hundred kilometres. Other luxuries such as massage and heated seats also increase fuel consumption a little when used.
Last but not least, actively seek out cheaper gas stations and take advantage of their loyalty programs.
If you operate a freight transport company or deal with public passenger transport, then your fleet should take advantage of modern fleet management systems. These can also be used for passenger cars in companies. Telematics constantly monitor how individual vehicles are used, as well as the driving style and current consumption.
By linking the system to company fuel cards, which tell you the price of fuel in advance and allow you to take advantage of better prices at petrol stations across Europe, savings in tens of percent can be made in the final count.
You can monitor data for individual vehicles and employees. What's more, you can predetermine which petrol station your employees will get fuel at, so they don't end up choosing one with a higher price.
So, in corporate fleets, telematics is probably the best option at the moment to keep fuel prices at bay and mitigate the impact of the current higher prices.
