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Analysing Austrian Petrol Prices

Author

Listed:
  • Wilfried Puwein

    (WIFO)

  • Michael Wüger

    (WIFO)

Abstract

Austria has always been among the OECD countries with the highest net petrol prices. Compared to Germany, annual average prices (excluding taxes) in 1998 were higher by 30 percent for Eurosuper, and by 27 percent for diesel. In Austria, petrol prices were weaker in their response to changes in crude oil prices than in Germany. Like the high level per se, the "inertia" is due to lack of price competition. The major petrol companies have so far competed primarily on the basis of advertising, service quality, product design and new products. Market shares were, at least partly, safeguarded by subsidising petrol stations with weak sales, a strategy that delayed structural adjustment in the distribution system and prevented significant cost cuttings. In competing against discounters the major companies responded mainly with a single strategy: when a discounter attempted to woo shares away by offering low prices, branded petrol stations similarly cut their prices, so that the discounter was unable to achieve the sales growth rates required for fixed cost regression. When the petrol prices were released from price control by the government in 1981, attempts were made to harmonise the net price level in Austria with average prices in the western neighbour countries by way of agreements between the government and the petroleum industry. The 1990 agreement between the minister of economic affairs and the oil industry ("glass pockets"), however, produced no measurable change in the pricing process. The agreement of March 1999, on the other hand, put a noticeable damper on price increases. Between April and August 1999, prices rose by ATS 0.20 to 0.26 less than would have been expected if terms had not been changed. The net price level for super declined by 7.5 percent.

Suggested Citation

  • Wilfried Puwein & Michael Wüger, 1999. "Analysing Austrian Petrol Prices," WIFO Monatsberichte (monthly reports), WIFO, vol. 72(11), pages 731-742, November.
  • Handle: RePEc:wfo:monber:y:1999:i:11:p:731-742
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    References listed on IDEAS

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    1. Salmon, Mark H, 1982. "Error Correction Mechanisms," Economic Journal, Royal Economic Society, vol. 92(367), pages 615-629, September.
    2. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
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