The European Central Bank published an analysis of how the 2026 Middle East oil shock affected euro area fuel prices and inflation. It found that crude oil price increases typically pass through to pre-tax pump prices fully in absolute terms within one or two months, although fixed taxes and other costs limit the percentage increase paid by consumers. Refining margins amplified the latest shock as the closure of the Strait of Hormuz constrained global refining capacity and reduced refined-product exports. Average euro area diesel prices rose from EUR 1.63 per litre in late February to EUR 2.18 in the first week of April as Brent crude peaked at USD 138 per barrel and refined diesel at USD 197. Refining costs and margins increased from a monthly average of EUR 0.10 per litre of diesel in February to EUR 0.26 in March, while temporary tax reductions partly cushioned consumers. Fuel inflation drove euro area energy inflation from minus 3.1% in February to 10.8% in May before it eased to 8.5% in June. Renewed conflict escalation pushed diesel prices back to about EUR 1.98 per litre in the third week of July, with refining margins contributing EUR 0.35 to diesel and EUR 0.23 to petrol prices during the first three weeks of the month. Based on diesel futures as of July 20, the contribution from refining margins is expected to peak in August and decline to EUR 0.16 per litre by the end of 2027.
European Central Bank2026-07-31
European Central Bank finds rapid fuel price pass-through and amplification from refining margins
The European Central Bank found that oil price increases pass through rapidly and fully in absolute terms to euro area pre-tax pump prices, while fixed taxes moderate the percentage impact on consumers. Refining constraints linked to the Middle East conflict amplified the 2026 shock, helping lift diesel prices from EUR 1.63 per litre in late February to EUR 2.18 in early April. Renewed escalation pushed prices higher again in July.