Category: Energy News European Fuel Smuggling

Europe has a growing black market for fuel smuggling. The rising cost of fuels, largely diesel, has led to a growing trend for theft, smuggling and fraud throughout all of Europe.

Cross border smuggling has been particularly prevalent due to arbitrage, both in government taxation of fuel as well as the price differences in every country. Fuel wise, the price per litre of Diesel in Russia is around 0.71 Euros. Next door in Poland it is 1.34 Euros according to data from Bloomberg. In Lithuania, one in every four consumers admitted to purchasing on the black market, purchasing lower-priced fuel from trucks coming from Russia and Belarus which is sold at a “mobile pump” according to the Vilnius-based Lithuanian Free Market Institute.

Taxation of fuel also provides an incentive for smugglers. “The share of tax in the pump price for diesel is 41 percent in Luxembourg, the lowest in the region. In the U.K., tax accounts for as much as 58 percent of the price” on data compiled by Bloomberg. As such, the margins on both taxation and prices of fuel are an enticing incentive for the black market as well as organised crime.

Refineries are also suffering the consequences of theft. Most of Europe’s refiners are already shutting down or up for sale on the back of low margins. Margins will probably stay below 2012 levels for the rest of this year, OMV AG (OMV), the Vienna-based oil company that runs refineries in Austria, Germany and Romania, said in an earnings statement Aug. 13. With theft directly from refineries compounding their dwindling revenue, cases such as Germany’s largest oil refinery, MiRO in Karlsruhe where “87 truckloads that were stolen over a period of more than a year starting in early 2011” show the scope of the problem.