In the last week, fuel prices have decreased across Norway. Motorists who have become used to 25 kroner per litre have had the opportunity to fill up their tanks for 16-17 kroner a litre in several cities, Norwegian Broadcasting (NRK) reports.
There is no widespread consensus on why the prices are going down, and energy analysts and industry experts have pointed to both domestic and international factors as potential drivers of the price drop.
Why are fuel prices dropping?
According to Circle K, the lower prices are a result of local price wars and low purchase prices.
“We are experiencing strong competition in several places in Norway now. The local price wars push prices down significantly,” Kjetil Foyn at Circle K told NRK.
Low purchase prices (that is, the prices that companies pay for fuel in the market) also contribute to favourable fuel prices for end consumers.
“Our purchase price has fallen a lot for both petrol and diesel in the last week,” Foyn added.
Nordea energy analyst Thina Saltvedt believes the most important reason for the decline in fuel prices is the resurgence of the coronavirus pandemic in China.
According to her, China accounts for 16 percent of the world’s oil consumption.
“Now, the country is closed to a greater extent, and the consumption of oil is down. Another reason is a slowdown in activity in the global economy due to the rise in interest rates and the threat of inflation,” she explained.
Saltvedt thinks it is too early to say whether the decline in petrol and diesel prices will last due to the volatility in global markets and the uncertain security situation.
“(Russia) is an important player in the oil market and thus has a major influence on access to oil and oil products,” Saltvedt added.
Prices might rise soon
According to the analyst, the European Union (EU) will stop buying Russian oil that is transported by ship from December 1st, which might also affect fuel prices.
“That means that access will be reduced. As a result, prices may rise again…
“If oil prices continue to fall as much as we have seen so far in November, the Organization of the Petroleum Exporting Countries (OPEC) will cut their production so that prices rise again. We saw that after the sharp drop in fuel prices during the coronavirus crisis,” Saltvedt noted.