Petroleum and Motor Fuels

Accounting for 34% of primary energy consumption in 2016, i. e. the quantity of energy that is used every year in a country in sum total, petroleum continues to be the most important primary energy source. While petroleum still accounted for more than half (1970: 53.1%, 1975: 52.1%) of primary energy consumption in the 1970s, its share in the 1980s dropped above all due to the greater use of natural gas for heating (1980: 40.6 %, 1985: 33.9 %). After that, it was above all a surge in transport-related consumption that led to a temporary resurgence of petroleum's share of primary energy (1990: 35.0%, 1995: 39.9%, 2000: 38.2%, 2005: 35.5%, 2010: 32.9%).

The Federal Government has set out the objective of reducing primary energy consumption by 20% from 2008 to 2020 and by 50% by 2050. To achieve this, it is necessary for petroleum products and other energy sources to be used much more efficiently.

Domestic sales of petroleum products totalled 104 million tonnes in 2016. .In quantitative terms, the main oil products were diesel fuel (38.4 million tonnes), gasoline (18.3 million tonnes), naphtha (16.5 million tonnes), which is used for petrochemicals, and light fuel oil (15.8 million tonnes). Other oil products include jet fuel (9.2 million tonnes) and heavy fuel oil (4.5 million tonnes); the latter is used in industry

According to the Working Group on Energy Balances, 94 % of final energy consumption in the transport sector was accounted for by mineral oil in 2015. In absolute terms, mineral oil consumption in transport was at the same level as it was in 2005. The Federal Government is pursuing the goal of reducing final energy consumption in the transport sector by 10% by 2020 and by 40% by 2050 compared with 2005 levels. The sector should thus also contribute to the reduction of greenhouse gas emissions. This will require a wide range of measures, from the increased use of biogenic and alternative fuels such as natural gas and liquefied petroleum gas, to reducing vehicle fuel consumption and expanding electromobility. In 2015, final energy consumption in transport was 1.3% higher than in 2005.

In terms of passenger and freight transport performance, specific energy consumption (in megajoules/100 passenger-kilometres) fell by around 10% between 2005 and 2014, and by just under 38% between 1990 and 2014 (average 1.97% per year).

The Federal Government is currently using a broad-based and technology-oriented Mobility and Fuel Strategy (in German) that takes into account all alternative technologies and energy sources in order to advance the energy transition in mobility. The mobility and fuel strategy is being further developed.

The market development of electric, hydrogen and natural gas vehicles will only succeed if there are enough charging points or filling stations. The Federal Government is therefore working to implement the EU Directive on the deployment of alternative fuels infrastructure (AFID) (in German). A National Strategy Framework sets out how a network of fuelling and charging stations for alternative propulsion systems in road and maritime transport is to be developed..

Germany's crude oil imports amounted to 91 million tonnes in 2016. The most important supplier country is Russia, accounting for just under 40% of the country’s crude-oil imports last year. In 2016, some 22.4 million tonnes of crude oil were imported from Norway and the EU Member States – a figure that corresponds to less than a quarter of Germany’s crude oil imports

.Although as direct suppliers the OPEC countries are not nearly as important to the German supply of crude oil as was the case at the beginning of the 1970s, their influence on the world oil market remains strong: Last year, they contributed around 40 per cent to global crude oil production and accounted for more than 70% of global conventional and non-conventional crude oil reserves, i. e. proven quantities of crude oil that can be exploited at current prices and with present-day technology. On top of this, solely the OPEC countries led by Saudi Arabia have major reserve capacities, i. e. the possibility to increase oil production within a matter of weeks for a certain period of time. This allows them to compensate, for example, for seasonal peaks in demand or temporary bottlenecks in other producing countries.

Domestic production contributed 2.4 million tonnes to the oil supply. Domestic petroleum production is centred in Schleswig-Holstein and Lower Saxony. Under mining law, the German Länder are also in charge of approving exploration and production activities. The only offshore production of crude oil in German waters takes place on the Mittelplate drilling and production platform, about seven kilometres off the Schleswig-Holstein North Sea coast. The companies involved in the production of petroleum and natural gas are organised in the economic association Erdöl- und Erdgasgewinnung e. V.

Individual companies decide what to procure and thus the origin of crude oil imports - aside from exceptions due to EU or UN sanctions on certain countries. The German Government supports the international activities of German enterprises politically. It has energy partnerships with several states that are based on long-term, mutual cooperation. On top of this there are multilateral processes within the framework of the European Union, the International Energy Agency (IEA), the Group of Seven/Eight (G7/8) and the Group of Twenty most important industrialised and newly industrialising countries (G20).

The crude oil market is a global market, i. e. global factors on the supply and demand sides determine the price of crude oil (economic growth of the industrialised countries, oil stocks, the dollar rate, etc.). The oil trade is by the same token oriented towards reference types such as North Sea "Brent" oil and the US reference type West Texas Intermediate (WTI). In Europe Rotterdam is the most important trading centre for crude oil and petroleum products. Trading takes place in dollars, which means that the local price for fuels and heating oil is also influenced by the exchange rate of the Euro.

Crude oil is imported into Germany via four transnational crude oil pipelines as well as the ports of Wilhelmshaven, Brunsbüttel, Hamburg and Rostock. Pipelines lead from the ports of Wilhelmshaven, Brunsbüttel and Rostock to various refineries (only in German). The pipeline infrastructure is owned by the petroleum-refining industry; they are operated by joint ventures of several petroleum companies.

Crude oil, intermediate and finished products are stored both underground in caverns as well as above ground in refineries and numerous tank storage facilities that are independent of refineries. Tank storage facilities in Germany have a total capacity of 62 million cubic metres, of which more than 40% is accounted for by caverns (as of 31 December 2015). With regard to surface storage capacities, once again around one-third are operated by companies that are independent from the refineries. A significant portion of total capacities are used by the Petroleum Stockpiling Association to stockpile supplies of crude oil and crude oil products as provision for times of crisis.

Petroleum is processed in Germany at 13 refineries with a crude oil refining capacity of 104.4 million tonnes. Germany’s gross refinery output of 106.5 million tonnes is the highest in the EU. According to the Federal Statistical Office, 16,967 people were directly employed in oil processing in 2015. Most of the refineries are owned by foreign multinational energy companies.

In addition to the refining of crude oil, most of which is imported, into petroleum products, finished products are also traded internationally. Almost 37.7 million tonnes were imported into Germany and about 22 million tonnes exported in 2016. A significant share of this international trade - e. g. almost half in the case of diesel imports - was accounted for by energy traders that do not have any refining capacities of their own. Trade also helps smooth out differences in the consumption and production structure for petroleum products. Thus more petrol and petrol components were exported than imported, while the foreign trade balance with so-called middle distillates (diesel, light heating oil and heating oil components) is negative.

Diesel, petrol and other fuels such as liquefied petroleum gas (LPG) and natural gas are distributed at more than 14,000 road and 350 motorway petrol stations. In addition to the major petroleum companies, there are numerous companies independent of multinational enterprises operating in the fuels market: organised in the Bundesverband mittelständischer Mineralölunternehmen e.V. (UNITI), these companies operate approximately 5,700 stations according to the association's statistics, while companies organised in the Bundesverband freier Tankstellen e.V. (bft) (only in German) operate more than 2,250 road petrol stations.

In view of the market position of the major brand companies, most of which are present throughout Germany, the German Federal Cartel Office (Bundeskartellamt) believes that there is an oligopoly dominating the market consisting of five providers. The German Federal Cartel Office described this in the final report of its sector study of "motor fuels" (PDF: 218 KB) presented in May 2011.

The Federal Ministry for Economic Affairs and Energy has initiated several legislative measures aimed at promoting competition in markets for liquid fuels:

For data collection and market observation in the fuel sector, a Market Transparency Unit for Fuels was set up at the Bundeskartellamt. As of 31 August 2013, petrol station operators and oil companies must report all price changes of the common fuel types Super E5, Super E10 and Diesel in real time to the Market Transparency Unit for Fuels. For the purpose of consumer information, it passes on the price data received to authorised consumer information services and enables consumers to find out about current fuel prices and the cheapest petrol station in the area or along the route via the internet, via their smartphones or on their navigation devices. This is a measure that is boosting competition. In addition, the ability of the Bundeskartellamt to intervene is being improved, especially in response to illegal exclusionary strategies and other forms of market power abuse. A report published on 10 August 2018 confirms the positive impact of the market transparency unit: in addition to delivering higher transparency on fuel prices, the MTU Fuels is no longer registering any significant price hikes in holiday periods.

In the 8th revision of the Act Against Restrains of Competition, which entered into force in June 2013, the prohibition against so-called price-cost scissors, which was originally slated to go out of effect at the end of 2012, was extended. Price-scissors sales are deemed to take place in the market for fuels whenever a petroleum company demands a lower price from car drivers for fuel at its petrol stations than that supplied to competitors (for instance, independent petrol stations). This type of strategy for squeezing out competition in the market would have a negative impact on competition and prices over the medium and long term.

In Germany only those liquid fuels may be introduced in commerce that meet the German or European standards as laid down in the requirements of the Tenth Ordinance on the Implementation of the Federal Immission Control Act (10. BImSchV). E10 fuel has been part of this since the end of 2010 in accordance with a requirement set out in the European Fuel Quality Directive. This is a petrol with an ethanol content of up to ten volume per cent. Because E10 fuel is not suited for all cars and many car drivers reject the new fuel, already established E5 fuel with a maximum of five volume per cent ethanol content continues to be sold everywhere. Up to seven volume per cent biodiesel is allowed to be mixed with diesel fuel at present.

About six million heating units are fuelled with heating oil in Germany. Just like in the case of liquid fuels, quality-related properties for EL heating oil (extra-light) are laid down by the German Institute for Standardization (DIN). Standard heating oil with a maximum sulphur content of 1,000 mg/kg, low-sulphur heating oil with a maximum of 50 mg/kg sulphur content as well as biofuel oil, in which at least three volume per cent fluid fuel from renewable raw materials is mixed in, are common. In comparison to the liquid fuel market in Germany, the heating oil market is both more regionally oriented and has more small and medium-scale providers.

Biofuels such as bioethanol or biodiesel have been making a contribution to climate protection and energy supply for several years now, as it is the strategy of the Federal Government to encourage mitigation of greenhouse gas emissions in the area of transport and traffic as well.

The most important objectives have been set for the EU as a whole: at the European level it has been laid down in the Renewable Energy Directive 2009/28/EG (PDF: 1.3 MB) that every member state is to achieve at least ten per cent of final energy consumption from renewable energy sources in the transport sector by 2020. On top of this, under the EU Fuel Quality Directive 2009/30/EC (PDF: 1.1 MB) greenhouse gas emissions from fuels are to be cut by at least six per cent by 2020. Biofuels will be assigned an important role in attaining both of these objectives.

The Federal German Government has set out biofuel quotas in the Federal Immission Control Act (BImSchG) to this end: In 2015 and 2016, companies in the oil industry had to reduce greenhouse gas emissions by 3.5 per cent compared to the total quantity of gasoline fuel, fossil diesel fuel and biofuel that they had placed on the market, they have to reduce emissions by 4 per cent between 2017 and 2019 and by 6 per cent compared with a reference value to be calculated from 2020 onwards. For this purpose, greenhouse gas emissions must be determined for each individual biofuel quantity and then verified by sustainability certificates.

The Federal Government has issued a Biofuel Sustainability Regulation (Biokraft-NachV) in order to guarantee the environmental compatibility of biofuels. Under this, biofuels are only deemed to be manufactured in a sustainable manner if they save at least 35% on greenhouse gases in comparison to fossil fuels - with the entire production and supply chain being included in the equation. The percentage rate rises to 50 per cent for plants that were commissioned by 5 October, 2015. Areas with high carbon content or high biodiversity must not be used to cultivate plants needed for biofuel production. Similarly, only raw materials originating from sustainable cultivation are allowed. Detailed specifications are being made for these from the point of view of nature conservation and environmental protection. This excludes raw materials from primary forests such as rainforest areas.

The amendment to the Directive relating to the quality of petrol and diesel fuels and the promotion of the use of energy from renewable sources (Amendment Directive 2015/1513/EC) aims to avoid indirect land use changes (ILUC) when promoting biofuels. This is to be achieved by allowing "conventional" biofuels (from starch, sugar and vegetable oils) to be credited only up to a share of 7% of the 10 per cent EU target for renewable energy in transport. The remaining 3% is to be covered mainly by biofuels from residual and waste materials as well as advanced biofuels (e.g. cellulose) and the electricity used in rail and electric vehicles. 2017 was the target year to implement this Amendment Directive in the Member States.

The Federal Ministry for Economic Affairs and Energy pays particular attention to ensuring that biofuel policy is economically and technologically neutral. Alternative fuels such as biomethane, which is a biogas treated to attain natural gas quality, are obtained from energy crops and agricultural residues. It can be fed to the filling stations via the existing natural gas network, and can be used as fuel. Throughout Germany, 81,423 natural gas vehicles (figure from the Federal Motor Transport Authority as of 1 January 2015) can be refuelled at 916 natural gas filling stations. Biomethane and natural gas, however, only account for a small portion of total fuel sales.

Liquefied Petroleum Gas (LPG), which is made up of propane, butane or a mixture of the two, has been used in traffic for many years now. It is the most-used alternative fuel in the world. In Germany Liquefied Petroleum Gas can be obtained at 6,699 petrol stations. According to statistics from the German Federal Motor Transport Authority (Kraftfahrt-Bundesamt - KBA), around 494,148 (as of the 1st January 2015) cars operate with LPG in Germany.

Just as for other goods and services, prices for petrol and diesel are purely a result of supply and demand. Studies regularly show that prices for petrol and diesel at petrol stations in Germany generally display the same trends as wholesale prices for fuels on the Rotterdam oil market. These prices for their part once again follow the price of crude oil, but can also decouple from the crude oil price up to a certain degree for a brief period of time depending on supply and demand for the respective product.

In addition to the price for the respective product, additional cost items also flow into final consumer prices: these include the Energy Tax, which has been 47.04 cents per litre for diesel and 65.45 cents per litre for petrol since 2003, and value-added tax, which is 19% of the total value of the good. In addition, costs accrue due to the mixing of biocomponents to meet the biofuels quota, transport, storage and distribution of fuels. Business enterprises that produce their fuels or import these into Germany also pay a contribution to the Petroleum Stockpiling Association for the stockpiling of petroleum and petroleum products as a provision for times of crisis. This is 0.3 cents per litre for diesel fuel and 0.27 cents per litre for petrol.

More information on the Market Transparency Unit for Fuels can be found here.

The European Commission publishes a so-called "Oil Bulletin", which provides an overview of consumer prices and taxes on fuels in the Member States of the European Union, in the Internet on a weekly basis.

Among the sectors that depend on a reliable supply of oil are private and commercial transport, shipping, aviation, heating, and manufacturing. As we have seen in the past, better energy efficiency, energy conservation and a switchover to technologies relying on other sources of energy can help reduce our dependency on oil. Given our high level of dependency on oil imports and the risks affecting the world market, we do, however, need to take precautions against short-term disruptions of our supply. Within the Federal Government, the Federal Ministry for Economic Affairs and Energy is in charge of ensuring energy security and taking precautions to shield ourselves from the effects of energy crises.

International framework

As of 1966, oil companies have been required to create reserves to be used during supply disruptions. Since then, the legal requirements underpinning Germany's reserves of petroleum and petroleum products have been amended several times, notably to bring them into line with European law and with the provisions of the International Energy Programme of 1974 - the programme under which the International Energy Agency (IEA) was established. Thanks to Council Directive 2009/119/EC on Stocks of crude oil and petroleum products (PDF: 801 KB) of 14 September 2009, the same stockholding requirements have applied since 2013 across all 28 EU Member States and the 29 countries that are members of the IEA. These obligations have been implemented nationally by way of the Act on the stockpiling of crude oil and petroleum products (Act on the Stockpiling of Oil and Oil Products, in German) of 16 January 2012 (Federal Gazette I p. 74 of 16 January 2012). Amendments to the Act on the Stockpiling of Oil and Oil Products came into force on 1 January 2017 as a result of the Act on the Stockpiling of Crude Oil, the Collection of Mineral Oil Data and the Change to High Calorific Value Gas (PDF: 71 KB, in German) (PDF, 1 MB). These relate in particular to the following four aspects:

• the Petroleum Stockpiling Association is to be opened up for member firms based not only in Germany, but also in other EU Member States, Norway and Switzerland.
• Domestic petroleum companies are to be granted permission to hold reserves for parties from third countries that are required to hold such reserves.
• In light of the fact that shipping fuels, which are not subject to stockpiling requirements, are now often mixed with diesel to make them more environmentally friendly, companies are to be given the choice whether they want to continue to pay the relevant contributions after storage or make the payment right after the fuel has been mixed. This second option has the advantage of eliminating the need for companies wishing to be reimbursed to ensure that the exact quantities of diesel contained feature on all documents throughout the supply chain between mixing and storage.
• The Petroleum Stockpiling Association is to be given greater leverage when it comes to contracting, so that it can better respond to the specifics of the petroleum business and of each individual storage site.

The Federal Office for Economic Affairs and Export Control is in charge of sending monthly updates about the amount and make-up of Germany's petroleum reserves to the European Commission and to the IEA Secretariat. Other important tasks of the Office include those of compiling the official petroleum statistics and monitoring compliance with stockpiling requirements by the organisation in charge of establishing and maintaining reserve stocks of petroleum. At EU and IEA level, the various Member States have formed working groups to discuss their policies around emergency oil supply and developments on the oil market.

Strategic petroleum reserves equivalent to 90 days' worth of domestic consumption

Since 1998, responsibility for Germany's strategic petroleum reserves has laid solely with the organisation in charge of establishing and maintaining reserve stocks of petroleum. This organisation is an institute under public law with legal capacity and answers to the Federal Ministry for Economic Affairs and Energy.

Under current rules, the Petroleum Stockpiling Association must ensure that Germany keeps strategic reserves of petroleum and petroleum products that are always equivalent to 90 days' worth of net imports. In other words, these strategic petroleum reserves are sufficient to offset three months of total disruption of all oil imports.

At present, the Petroleum Stockpiling Association keeps reserves of some 15 million tonnes of crude oil and 9.5 million tonnes of finished petroleum products to fulfil its legal requirements. Gasoline fuel, diesel, extra light fuel oil, and kerosene-type jet fuel are the most important fuels derived from oil, which is why Germany is keeping reserves of these finished products. Other products can be derived from the crude oil reserves that are being kept. Germany keeps reserves of petroleum products in all parts of the country, which allows it to respond quickly and successfully to any regional disruptions of supply. Most of the petroleum reserves are situated in caverns in the north of Germany. Using pipelines and tankers, the oil can be taken to the refineries to be turned into petroleum products.

The cost of the reserves is borne by the companies in Germany that import or produce gasoline fuel, diesel, extra light fuel oil or kerosene-type jet fuel. They are subject to fixed contributions of €3.56 per tonne, which is equivalent to 0.3 euro cents per litre of diesel or extra light fuel oil, 0.27 cents per litre of gasoline fuel, and 0.285 cents per litre of kerosene type jet fuel.

Fast response in the event of disruption

The petroleum and petroleum products that are held in reserve can quickly be put on the market in the event of impending or acute disruptions to supply, thus helping to prevent shortages. In such an event, the Federal Minister for Economic Affairs and Energy would issue an ordinance pursuant to the Oil Stockpiling Act, reducing the storage requirements for a limited period of time time. The Petroleum Stockpiling Association would then offer the reserves that have thus been "freed up" to its member companies at market prices. Within just a few days, this would enable market players to access additional amounts of gasoline fuel, diesel, kerosene, and heating oil.

The exact circumstances under which reserves can be freed up are listed in Section 12(1) of the Oil Stockpiling Act. They include situations whereby action is needed to counteract an impending or actual disruption to the energy supply, a substantial and sudden drop in deliveries of petroleum or petroleum products, and situations whereby action is taken pursuant to a decision by the IEA Governing Board.

Within the spirit of the Oil Stockpiling Act (rather than according to the letter), the main criterion to be taken into account is "a disruption to the physical supply of petroleum/petroleum products". Nevertheless, any impending or actual disruption must also be considered in terms of its economic impact. Reserves must, however, not be freed up for the primary purpose of bringing down market prices.

In Germany, there have so far been three cases in which strategic oil reserves have been freed up, always on the basis of a joint decision taken by the members of the International Energy Agency. These were during the Gulf War of 1990/91, in 2005 following the havoc wreaked by hurricanes Katrina and Rita in the U.S., and in 2011, when supplies from Libya were interrupted.