Pumping the Irish budget. What do you really pay for at a petrol station?

When paying for the petrol, you give most of the money to the state budget. See what you pay for when refueling your car and why by buying a hot-dog you chip in for the employees’ salaries.

Almost every year the oil price changes, and those in power introduce new taxes and charges. How does that influence the price we need to pay when refueling our car? We’ve decided to take a closer look at it.

We pay the refinery and the petrol station

The base of the petrol cost is its price at the refinery, which consists of crude oil price (excavated abroad) and the costs of transportation and refining. Together it’s around 31% of the final price.

The petrol station’s owner bears the costs of transportation and charges with the margin. It has to cover the costs of expenditures, like employees’ salaries, taxes or necessary service and control of equipment. Interestingly, the average yearly petrol margin (around 8%) is too low to bring profit. To stay in business petrol stations have to sell other products, oftentimes at higher prices than in normal stores. That’s why the next time you hear “would you like some hot dog with that?”, remember—these hot dogs among other things decide about petrol station’s existence.

The refinery price and owner’s margin combined give 39%. It’s not even half the price! What about the rest then? Well, you’ve probably got a hinch…

Charges and taxes are more than half the petrol price!

The remaining 61% are the money we give to the state—in the form of VAT, excise and NORA levy. Let’s have a closer look:

• Tax – petrol is charged with 23% rate VAT (charged on the net price with excise and NORA levy);
• Excise – 59 cents per litre. It’s levied on a per-litre basis and not as a percentage of the price, which means when the cost of fuel falls, the tax remains at the same level;
• NORA levy – the main purpose of the Nora levy is to fund the maintenance of Ireland’s strategic oil reserves, 2 cents per litre.

Why the prices at petrol stations differ?

Since we already know the components of petrol price, there’s one more question left: why at some stations we can refuel cheaper than the others? The answer is easy—it depends on the margin set by the owner.

The margin (and hence the final price of petrol) is lower where the strongest competition is, therefore in places where many stations in close proximity are. That way the owners want to convince consumers to refuel at their place. Oftentimes we’ll find the lower prices at the malls which have their own stations. Why? Their managers hope that if we stop for the cheaper petrol, we’ll also go for shopping in other stores.

The information stated above are based on the manufacturers’ reports, international carriers’ offers, data sets found on the professional websites and more. Of course, they’re not a perfect reflection of the reality but only estimation that we used to show the products’ journey to the stores. Not many companies share the details of manufacturing and distribution of their products. By taking a closer look at their prices we want to encourage discussion and above all—conscious shopping!

About VAT: this tax is charged on the net price, which means net price = 100%, gross price = 123% (100% + VAT 23%). Consequently, VAT makes approximately 19% of the gross price.

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Check what you pay for

Take a look at our Real Price of Goods series and find out what’s the price of: