Europe's Refining Woes Drive Diesel Prices to New Heights

The price of petrol and diesel in Europe has been stubbornly high despite crude oil prices not reaching record highs. Brent crude, the international benchmark, has traded between $73 and $126 a barrel since February, but European fuel prices have been influenced by refining and product supply issues.

Eurozone inflation rose to 3.3% in August, driven mainly by higher energy prices, while petrol and diesel prices remain close to their historical highs. Petrol averaged €1.95 a litre across the EU in early September, about 4% below its June 2022 peak of €2.03, while diesel averaged €2.04, around 3% below its record of €2.11.

Experts attribute the widening gap between crude and European fuel prices to refining and product supply problems rather than crude supply issues. Refining margins are at high levels, with Eurobob E5 petrol barges trading at a premium of $62.07 a barrel over Brent futures, just below the June 2022 record of $62.10.

A shortage of diesel in Europe is due to low fuel inventories, conflicts in the Middle East, and attacks on Russian refineries disrupting global supplies of refined products. European governments have temporarily reduced fuel taxes or introduced support measures since the energy shock began, but the response has varied by country.