“This is full day and night,” says Rai, an employee who works at the Ballenoil service station in Tres Cantos (Madrid). Some drivers wash their cars in the pits with high-pressure water, and others refuel with gasoline or diesel. Today the price marked by the monolith (the information tower at the entrance) is 1,689 euros for a 95 liter of gasoline. A liter of diesel is a little more expensive: 1,729 euros. With the subsidy of 20 cents paid by the government, both remain at 1,489 and 1,529 euros.
A few meters further on, at the Repsol service station, both fuels are ten cents more expensive, even applying the government subsidy. “That’s because of the quality of our fuels,” Repsol employees say proudly. “Ours don’t spoil the engine, but those brands never know” . They imply that many (small) private label service stations adulterate gasoline to make more money.
The little ones deny it. “Fuel is the same for everyone,” they say at Platinium Oil, a network of more than 30 gas stations distributed along the Mediterranean coast. Platinium Oil acquires the product already “additivated” (with improvements) from the distribution terminal. In Ballenoil they affirm that they add additives to improve gasoline. “We are the only fuel company on the market that has installed a pioneering instant additive system at the pump,” says its website
The competition between the large networks of operators such as Repsol, Cepsa or BP, and the small service stations has become fiercer since fuel prices began to rise throughout 2021 due to the global economic recovery, and this year of 2022, for the invasion of Ukraine by Russia. The price of fuel has risen 40% since January 2021.
To compete on price, the small station networks have made a notable effort to save . For example, they do not have a convenience store, that is, there is no mini-supermarket with bread, milk, coffee, gum, chips… There are also no large facilities except for the washing machines, which are of the “wash your car” type. . A trained driver can wash and rinse the car for one euro. The station is open 24 hours a day all year round, but is only staffed during business hours. There is no cashier because you pay by card at the same pump. And they are always full. “He unloads a tanker a day here,” says Rai, referring to the 32,000-litre fuel trucks.
The fuel war has made apps that report the best prices popular. “Now with the difficulties, I understand that people are thinking about where to fill gas,” says the Repsol employee from Tres Cantos. Gas stations Spain is one of the preferred applications. It shows on the mobile screen a map with the best gas stations in Spain by price, by type of fuel and how far away they are.
In Spain there are more than 12,000 gas stations. Before Spain entered the European Union in 1986 (Common Market) there were some 8,500 gas stations that were mainly in the hands of Campsa (today Repsol). From that date, forced by the European Union, Spain liberalized its sector until it was completely opened in 1990: Shell, Galp, BP, Exxon, Total, Agip entered, but also anyone who had the economic capacity to set up a service station , and funds to buy fuel. This economic liberalization has allowed small businesses to carve out a niche for themselves with their gas stations, and consumers to enjoy competitive prices. “Drivers come here to fill up their tanks because they get a better price,” Rai continues, defending his Ballenoil station.
Consuelo Lamagrande is manager of the Platinium Oil network that is growing throughout Levante, from Catalonia to the Valencian Community. It already has more than thirty stations. His way of working resembles that of a broker. At twelve noon he begins to receive information from operators such as Dinef, Axoil or GMFuel, who inform him of the fuel price quote. She buys what is necessary for the next day’s sales estimates.
“In summer, in some tourist towns, a 32,000-liter tank is consumed in two days,” says Lamagrande. The margin for service stations such as Plenoil, Ballenoil or Platinium Oil is very narrow: between 5 and 6 cents per liter. The key lies in two things: that the service station sells many liters, and that the costs are negligible.
When the government decreed the subsidy of twenty cents per liter of fuel in April 2022, a service station had to pay the subsidy in advance and wait for the government to pay it weeks later. This involved advancing an average of more than 80,000 euros per gas station per month.
Some have not been able to resist and have had to close their stations. Others have had to borrow from banks to finance them for those thirty days until the State returned the money. And pay interest. For networks of more than ten stations, it was almost half a million euros per month. “In this world of energy, being small is worse than being big”, says Jorge Sanz.
On the other hand, the big ones like Repsol or Cepsa do not have financing problems because they have enough cash until the State returns the money. In the first half of 2022, Repsol earned 2,599 million euros. The benefits provided by service stations to Repsol are minuscule: only 5% of the total. “Where the big ones win is in prospecting, extraction and refining,” says Jorge Sanz, former director general of Energy and Mines.
It refers to the fuel cycle, which begins somewhere in the world (a desert, for example), where the big operators have oil wells. That crude oil is transported by land or sea to refineries that convert it primarily into gasoline and diesel. From there, it goes through land, underwater pipelines or by huge ships to the terminals of the consuming countries. The market is so competitive that a fleet of ships can turn around in the middle of the sea because another country has paid more.
In Spain, the fuels are unloaded from ships and then distributed through the network of pipes and warehouses owned by Exolum (previously CLH). Large operators such as Repsol have refining plants in five parts of Spain, but sometimes it is more profitable for them to import refined gasoline or diesel than to do it in the country’s five refineries with the capacity to refine one million barrels a day. “There could be the possibility that, since refining margins have increased, vertically integrated operators [those that extract oil and refine it], have a better position to be more competitive than independent gas stations” , recognizes the National Commission of Markets and Competition (CNMC).
Small gasoline traders like Platinium Oil, Ballenoil and Plenoil not only have to play with the narrow margin to survive, but also complain that the big ones like Repsol have privileged information. “The day the Government decreed the subsidy of twenty cents per liter, they already had all the machines and the bureaucracy prepared,” says the representative of one of these small networks.
The large operators affirm that, during the 2020 confinement, despite the drop in demand, they kept “all the refineries operational and the service stations open”. That made them lose money. Repsol lost 3,289 million euros in 2020, and Cepsa 919 million. Now, the big operators are “trying to maximize the discount they offer their customers, because they are very aware of the difficult times our country is experiencing,” they say in the Spanish Association of Petroleum Products (AOP) that represents the big ones.
The small ones complain about the aggressive marketing campaigns of the big oil companies . For example, apart from the twenty cents of state subsidy, Repsol offers ten cents more if the client downloads the Waylet application on their mobile. It was an offer “for the whole summer” of 2022 at the company’s 3,300 gas stations. The big oil companies have more advantages During the long journeys along national highways during the summer, drivers refuel at Repsol or Cepsa gas stations, which are the two largest networks in the country. A consumer is not going to deviate 30 kilometers to refuel at a small station, even though it is cheaper. In addition, at Repsol or Cepsa gas stations, drivers not only buy gasoline, but also LPG, Autogas, charging for electric cars… And on top of that, food, coffee, soft drinks, sweets for the children… They can sit at a table, and even enjoy from the landscape. The idea of the big operators is that visiting a station is a “customer experience” and that is why they are going to invest money in making them even more sophisticated. Cepsa wants to replace the convenience store with a real supermarket. It will also allow you to collect packages and have a parapharmacy. The objective, as the second largest gas station network in Spain and Portugal says, is that stopping at a gas station is not about filling the tank but much more.
What all gas stations, small and large, have noticed is that consumer habits have changed. Those who put 40 euros of fuel now put twenty and take less the car for a walk. The number of “simpas”, drivers who flee without paying, has also increased . That is why gas stations increasingly demand prepayment from their customers.
For the most catastrophic analysts, the worst is yet to come. They speak of a liter of gasoline above three euros, and of a war in Ukraine that will last throughout the winter until 2023 or more. “If the sanctions against Russia are maintained, we will continue with high prices,” says Sanz. Winter is coming .
It’s the taxes, stupid
Every time a Spaniard puts a liter of gasoline or diesel in his car, the state takes half of the tank in taxes. Many still find it hard to believe, but it is so. According to the report of the National Market and Competition Commission, the breakdown of a liter of gasoline that costs 1,929 euros per liter (in May 2022) was as follows: fuel cost, 1,121 euros. To this are added three taxes (on hydrocarbons, special and VAT): in total, 0.808 euros.
To be exact, on that liter of 95 octane gasoline, the state took 41%. Two of these taxes are fixed: the one on hydrocarbons and the special one. VAT equals 21% of the final figure. What does that mean? That when gasoline prices drop and the subsidy ends, the State will proportionally take more than half: 52%.
Why is oil going down and gasoline going up?
In the first half of 2022, the price of a barrel of oil began to fall, but that of gasoline rose . How was it possible? The best explanation is the ice analogy . In the summer of 2022, the price of ice packs doubled for a number of reasons: the big ice makers produced less ice because they had a hard time keeping it cold due to the price of electricity; furthermore, the hot days started in May and lasted until August, so there was demand ahead of time; and, finally, there was more movement of national and international tourists. In some places there was no ice at all in early August or twice as much. But the price of the water bottles remained the same. That is, there were two markets: ice and water.
What happened to gasoline? There is a market for crude oil and another for gasoline, even though they come from the same element. The war in the Ukraine complicated things. “Russia is an exporter of refined products,” a source from the CNMC (National Markets and Competition Commission) tells Muy Interesante .
“Given Brussels’ reiterated intention to do without Russian oil/products this year [sanctions], the fear of shortages has done nothing but increase the price of diesel on international markets.” That is why the price of gasoline remained high despite the fact that the raw material (oil) had fallen on those dates. Added to that is the picaresque of the big operators. “They are very quick to transfer the increase in gasoline, but very slow for the decreases,” says Jorge Sanz, former director general of Energy and Mines.
