Energy price formation

The golden rule of economics is that prices must follow costs, which include the costs of extraction or production of the good in question, transport and distribution costs, marketing costs, plus a margin that remunerates the activity of making the good available (rate of return on invested capital). This margin is normally reasonable if the market is competitive; it is significant if the supply takes place in a monopolistic environment. In addition, taxes vary according to the product, and are particularly high when demand for the product is not very price-elastic. Demand is inelastic if it varies little when the price rises. This is the case for petroleum products, for which there are few substitutes; inelastic demand is therefore a good pretext for the state to impose high taxes on gasoline, diesel or heating oil.

The energy sector is characterized by the existence...