Refining Margins Fuel Europe's Soaring Fuel Prices

Rising oil refining margins have significantly contributed to the increase in euro zone fuel prices in recent months, according to an ECB blog post. The refineries' profit margins for diesel rose from €0.10 per litre of retail price before the Iran war to €0.35 in the first three weeks of July, while petrol margins increased from €0.04 to €0.23 in July.

Disruptions to refining operations and fuel exports in the Middle East, along with reduced Russian refinery throughput, have tightened global fuel supplies and pushed refining margins higher. The ECB blog suggests that refining margins will likely peak in August before starting to decline towards 2027.

Persistent high oil prices near $90 a barrel pose continued inflation risks, which could lead to broader price pressures forcing the ECB to raise interest rates. The Russian export ban on diesel and gasoline until January 31 has deepened the global supply crunch, sending fuel prices soaring even in countries that no longer buy fuel from Moscow.