Transport fuel prices in the European Union have struck record highs in recent days, driven by oil futures surging because of the Middle East war and Ukranian strikes on Russian refineries.The scale of the price increases have differed significantly from country to country, however, as have governments' measures to address the spikes. Crude oil prices have risen sharply since the start of the conflict in the Middle East, climbing from around $70 per barrel just before hostilities began at the end of February to about $100 currently. However, transport fuels refined from crude oil -- notably diesel, petrol and kerosene that is used to power planes -- have faced even greater upward pressure.
In addition to being key producers of crude oil, Gulf nations have become major exporters of refined products. Europe has relied on these producers following Russia's invasion of Ukraine in 2022. However, a surge in maritime freight costs in the Middle East, driven by risks to vessels in the Red Sea and the Strait of Hormuz, has made exporting refined products from the Gulf financially unviable.
Tankers designed for refined products carry far fewer barrels than those used for crude oil. Consequently, "the additional transport cost rises to around $50 per barrel" for companies, TotalEnergies chief executive Patrick Pouyanne explained in late August. Repeated Ukrainian drone attacks on Russian refineries are also significantly reducing the global supply of engine fuels, in particular diesel.
As a result prices are soaring, boosting operating margins for refiners, while countries are scrambling to avoid shortages. Read moreGermany cuts energy tax to lower petrol prices as Merz faces state key elections Across Europe, consumers are paying very different prices for their engine fuels because of governments' different approaches to taxes and subsidies. Julien Mathonniere, an economist at Energy Intelligence, explained that "Europe, in particular, taxes fuel heavily" with a minimum tax per litre of 33 euro cents for diesel and 35.9 cents for unleaded petrol.
This is before Value Added Tax of at least 15 percent in Europe. French VAT is at 20 percent. "Each EU country can add its own taxes" to the minimum rates, Mathonniere told AFP, causing significant differences at the pump.
On September 14, according to European Union data, a litre of diesel cost around 2.50 euros in Denmark and Finland, 2.29 euros in France and 1.83 euros in Spain. In general, across Europe, "taxes often make up more than two-thirds of the price", added Mathonniere. Arne Lohmann Rasmussen of Global Risk Management, explained that this is why "diesel prices are actually higher in Europe than in Asia, despite Asia being more directly affected by the conflict involving Iran".
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