"People always think that when prices go up, petrol stations earn more. In reality, it's the other way around," says Mike Schmitt. / © AFP
Our colleagues from RTL 5 Minutes talked to the president of the Luxembourg Federation of Service Stations.
Following the bombshell announcement at 6pm last Friday that the price of Diesel was to increase by 18.5 cents the next day, motorists rushed to the country's service stations. Endless queues formed, with some forcing their way through to fill up before it was too late.
Unfortunately, this "madness" is far from over. The war in Ukraine continues to add fuel to the fire. Petrol and heating oil are also going up, and many expect even higher prices in the days to come.
Will the threshold of €2/litre be crossed soon? Should motorists fear a fuel shortage? And who is making money in this crisis? Our colleagues at RTL 5 Minutes put five questions to Mike Schmitt, president of the Luxembourg Federation of Service Stations.
'It felt like we were at war!'
When asked how he experienced the unprecedented price increase last Friday, Schmitt stated that it was "incredible" and that he had never seen anything like it before. Even though business always slightly increases whenever prices go up a few cents, no service station in Luxembourg has ever been rushed in the way that they were on Friday. "It felt like we were at war," Schmitt explained. But there was little stations could do about the crowds, so they just served the customers. In that sense, it was "business as usual," Schmitt stated, and the customers just had to "take it easy".
As for diesel crossing the €2/litre threshold, Schmitt stated that since the price of a barrel of oil is increasing almost daily, diesel prices will "probably" follow. According to Schmitt, countries releasing part of their strategic fuel reserves will only have "a minimal impact" on the price increases. What is certain, on the other hand, is that "the consumer is being hit hard". Schmitt explained that particularly for those earning the minimum social wage and who travel 30 to 40 kilometres a day to work, the situation is "already becoming very complicated" with the current prices.
While Schmitt does not see any problems regarding fuel supply "at the moment", he does not want to rule out the possibility.
Reducing excise duties would be 'a step in the right direction'
"The state is one of the winners in this crisis,", Schmitt declared. At the moment, the president of the Luxembourg Federation of Service Stations argued, the state is getting richer, so it could reduce excise duties and still make enough money to maintain its budget. While Schmitt seems to recall that the ministry has hinted at reducing them slightly, the state is limited in what it can do at the European level.
Nevertheless, Schmitt thinks that this is "one of the main levers at the disposal of the state", seeing as the excise tax rate on fuel is over 50%. In practice, Schmitt explained, this means that if a service station sells fuel at €1 per litre, the state gets 50 cents back. At €2, the state would thus get €1. For this reason, Schmitt thinks that it is "clear that the state must reduce excise duties". It would be a "step in the right direction," according to the president of the Luxembourg Federation of Service Stations.
"The state recovers almost 50% of the excise duty on fuel," says Mike Schmitt. / © Archives RTL
"People always think that when prices go up, petrol stations make more money," but in reality, the opposite is true, Schmitt pointed out. Even if the price goes up, the service stations' margin per litre of fuel sold remains fixed, Schmitt explained. Not only are service stations thus not making more money, Schmitt continued, they actually lose money, because they have credit card charges that are proportional to the amount paid. This means that the more the customer pays, the more the service stations pay in bank charges.
In the medium and long term, another consequence is that the rise in prices will accelerate the purchase of electric vehicles, Schmitt added. Service stations have to compensate for this fall in fuel sales with something else, but Schmitt pointed out that they "already sell almost everything, flowers, meat, etc" in their shops.
"If it goes on like this, we'll end up selling fuel at a loss," Schmitt lamented, adding that service stations "have clearly seen better days". In addition, after two years of pandemic and last year's catastrophic weather and floods, service stations were hoping to see the return of the Belgian and Dutch tourists who usually come to fill up in Luxembourg in 2022. But considering the price of petrol, "we don't even know if these tourists will be able to afford a holiday," Schmitt acknowledged.
