Germany Essay Research Paper We are a

Germany Essay, Research Paper

We are a car maker with an interest in doing business in Germany. We know that we have to do a lot of research before we take the plunge and open a plant in Germany. We’ve researched the following topics on Germany; national context, role of economic geography, the cultural environment, legal environment, legal environment, it’s relationship with the United States, international trade, economic evolution and economic policies and strategies. This was a streneous task however we arrived to the conclusion that it would be profitable to do business in Germany.

Germany is the world’s third largest economy. While the German economy

currently is experiencing high unemployment and slow growth, the country’s

economic strength has been the subject of world renown since the end of

World War II. Germany is one of the founding members of the European

Union (EU), a North Atlantic Treaty Alliance (NATO) member, and a

member of the Group of Seven (G-7) industrialized nations and the General

Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO).

It joined the common European currency, the euro, on January 1, 1999, and

Frankfurt is the seat of the European Central Bank.

OIL

Germany consumes about 2.9 million barrels per day of oil, nearly all

of which it imports, making Germany the third-largest oil importer in the

world. German oil imports come primarily from (in decreasing order of

magnitude) Russia, Norway, the United Kingdom, and OPEC (Libya, Saudi

Arabia, Nigeria, Algeria). German imports from Russia have remained

unchanged in recent years. However, OPEC’s share of German imports has

decreased, while the share of North Sea oil from Norway and the United

Kingdom has increased. Germany produces around 61,000 bbl/d of crude

oil, much of which comes from the North Sea.

In Germany, about three-quarters of the price of gasoline is made up of

taxes, compared to around one-third in the United States. The pump price

for gasoline is about three times higher in Germany than the United States.

Gasoline consumption (and overall oil consumption) have declined slightly

since 1995. Between 1992 and 1997, the number of German gasoline stations

decreased (despite a rise in the number of stations in the former East

Germany).

Under a law which took effect on April 15, 1998, Germany’s strategic oil

inventory agency EBV is required to hold a 90-day emergency stockpile of

oil, up from 80 days previously. In late August 1999, the German government

planned to offer a tender for over 31 million barrels of sour crude oil in

response to increased crude prices. No further action was reported on this

tender as of October 1999.

Refining

Refining costs more in Germany than other countries in Europe, as Germany

levies eco-taxes. High costs have initiated a wave of consolidation and some

closures. Overall refining capacity has increased due to the opening of the Elf

Mider refinery in the former East Germany. The Elf Mider facility was the

first new refinery to be built in Europe in over a decade.

NATURAL GAS

Germany produces very little natural gas, and satisfies most of its demand

through imports. Almost one-third of Germany’s gas imports come from

Russia. The other main sources of imports are the Netherlands (about 24%)

and Norway (about 20%). Gas consumption accounts for about 20% of total

energy consumption in Germany. This share is expected to rise over the next

decade, especially for electric power generation as nuclear power is phased

out. Gas currently fuels only about 10% of German electricity.

Ruhrgas remains Germany’s dominant natural gas transmission company,

holding 60% of the German natural gas market. Years of Ruhrgas’s

monopolistic control of Germany’s gas market have left Germany with a

highly developed gas infrastructure. Ruhrgas is currently involved in laying

pipes to connect Poland to the German system in order to increase imports

of Russian gas via Poland, a project that could be completed in late 2001.

Ruhrgas has also bought stock in Russia’s Gazprom, in an effort to facilitate

closer relations between the two companies in anticipation of future increases

in German demand for gas.

Competition in the market has developed slowly. Ruhrgas’s main competitor,

Wingas, was formed in 1990 by a joint venture between BASF’s Wintershall

and Russia’s Gazprom. At the end of 1997, Wingas had become Germany’s

sixth largest company. Now, with its own domestic pipelines and links to

export supply lines, Wingas has gained market share, while Ruhrgas’s share

has decreased. Wingas is in the second stage of a pipeline construction

project that will connect Russia’s Yamal Peninsula to the German network,

which is expected to increase further the Wingas market share. The retail gas

market is expected to be fully opened, allowing consumer choice among

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