Record low fuel prices threaten independent petrol stations

With a large percentage of the world on lockdown and the threat of recession looming, the price of a barrel of crude oil has plummeted to a 17-year low of USD 23. In the Czech Republic, this has resulted in the lowest pump prices since 2016. Czech Fund's chief economist Lukáš Kovanda writes that quickly falling prices initially give gas station owners a window of opportunity to make huge margins, as they reduce prices to the customers at a significantly slower pace that the price their suppliers are selling it to them. But the underlying reason for the falling prices, lack of demand, eventually comes to dominate. Kovanda points out that the number of gas stations in the Czech Republic exceeded 4,000 for the first time even last year, giving the country one of the densest networks in the world. But they are now competing fiercely with each other. Kovanda says that one of the unlikely victims of the coronavirus crisis could end up being a large number of independently-owned stations. He points out that most operators rely more on their shops sales to produce regular profits rather than fuel sales. But since the stores are closed and most people are working from home, the number of commuters stopping in to fill up and do some convenience shopping is minimal.