The Problem of Cross-border Shopping for Gasoline

Passenger car traffic between Austria and its neighboring countries is very intensive; drivers can easily exploit differentials in gasoline prices. In 1994, about 64 million gasoline-powered cars, 11 million diesel-powered cars, 1.2 million buses, and 3.2 million trucks entered Austria. These numbers include both Austrian and foreign-owned vehicles. These vehicles constitute a potential for exploiting price differences of about 1.2 million tons of gasoline and 1 million tons of diesel fuel, about half of gasoline sales and more than two-thirds of diesel sales in Austria. About 20 percent of the gasoline and 27 percent of the diesel arbitrage potential is accounted for by Austrian vehicles. During the last 30 years, gasoline sales in Austria have reacted strongly to changes in gasoline price differentials vis-à-vis Germany. If the price in Austria rose by 10 percent relative to that in Germany, sales decreased by 3.4 percent, ceteris paribus. Increases in fuel prices do bring about a decrease in sales in Austria; but, with prices remaining unchanged abroad, more fuel is imported directly, with the result that overall consumption of fuel declines by a smaller amount. Doubling the mineral oil tax on gasoline in Austria would raise the price of gasoline by 60 percent. On the assumption that prices remain unchanged in Germany and that price differentials vis-à-vis other neighboring countries do not change, domestic sales would drop by 32 percent, revenues from the mineral oil tax would rise by 36 percent, and direct imports of gasoline would soar by 470,000 tons. Additional expenditures on gasoline by persons driving across the border from Austria to Germany would total ATS 7 billion. Doubling the mineral oil tax on diesel fuel would raise the price of diesel by 50 percent, reduce domestic sales by 20 percent, and increase revenues from the mineral oil tax by 36 percent. Cross-border shopping in Germany would amount to ATS 3.5 billion. High differentials in fuel prices encourage many people in the eastern part of Austria to take trips to neighboring countries; such trips not only serve to buy cheap gasoline, but also to shop and visit restaurants. A major part of direct imports from Slovenia, worth some ATS 2 billion, can be attributed directly and indirectly to cross-border gasoline purchases. By contrast, the major incentive to undertake a shopping trip to Hungary, the Slovak and Czech Republics comes from lower prices of tobacco, food, and meals at restaurants.