Crude Oil prices, a major concern in Germany

Several weeks ago, local German media ran headlines on the lines of, Petrol prices hit all-time high in February.

The story gripped the Nation. At that time, the average cost for Super E10, a variety of gasoline that has 10% Ethanol, stood at 1.59 Euros (US$2.12) per litre.

Today, Petrol prices shown in big, bold fonts on billboards at gas stations continue to raise eyebrows. The lowest price for Super E10 at gas stations such as ARAL, Shell and Esso, the 3 leading brands in Germany -was 1.63 Euros per litre.

Few drivers can be spotted at the gas stations. Taxi owners and companies are not allowed to pass on the costs to passengers because the local government keeps an eye on taxi fares.

As always, fluctuations in Crude Oil prices bring on a powerful impact well beyond gas stations in the Country.

A study recently conducted by the German newspaper Frankfurter Allgemeine showed that food is becoming more expensive in the Country. Prices of daily necessities go up because they are transported by trucks running on fuel.

Amid rising fuel costs and shrinking profits, Germany's problems are compounded by labor unions pushing for higher wages.

Verdi, a powerful labor union, is involved in negotiating a 6.5% pay rise for 2-M public workers in Germany. In a warning strike at airports across the Country, hundreds of flights were canceled.

Employers proposed a 2.1% pay rise from May this year and another 1.2% hike from March next year, in return for 24 month contracts. The union rejected the proposal saying the increase does not keep pace with inflation.

Inflation in of Germany reached 2.27% in February, above the EuroZone target of 2%.

The success of German economy can be partly attributed to price stability. After a nightmarish bout of hyperinflation in the 1920′s, Germany has been careful to control inflation.

Central bankers in Germany have expressed their concern about possible inflationary risks due to massive injections of liquidity by the European Central Bank (ECB). The ECB has lent over 1-T Euros to banks in 2 longer-term refinancing operations since December.

ECB President Mario Draghi has referred to Germany the Role Model in Europe thanks to its culture of stability. In a recent interview with Germany's Bild newspaper, he said if inflation risks grow, the ECB will immediately act preemptively to avert price rises.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.

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