Europe is attempting to contain the energy crisis with a patchwork of measures

European governments are frantically attempting to cushion a fuel price shock, the further development of which even some analysts are now unwilling to predict. Brent crude oil is holding steady at just under $100 per barrel, while diesel prices are rising across Europe.

The international oil market has been expensive for months. What has changed is the confidence of those paid to explain its performance. JPMorgan told its clients on September 17 that, for the first time since the conflict over Iran began about seven months ago, the bank’s commodities team no longer had a baseline scenario for how these disruptions might end.

“We simply do not know how to model the endgame,” the bank’s analysts wrote after several economic thresholds, which they had originally thought would force a diplomatic solution – including an oil price of more than $100 per barrel – had already been crossed.

According to the bank, a Brent price of around $90 in September would have been consistent with known supply and demand conditions. Instead, futures traded at $100 and above because traders factored in the risk of further defaults, the extent of which no one can currently estimate. On Sept 28, the nearest Brent contract continued to trade at around $99 per barrel.

Even existing inventories are doing little to cushion the shock. The US Energy Information Administration (EIA) stated that prices are likely to remain elevated until oil trading in the Middle East resumes and inventories can be rebuilt.

The September report from the International Energy Agency (IEA) illustrates the extent of the decline: Observed global inventories fell by a further 95 million barrels in August. This brings the total decline since February to 507 million barrels – an average of around 2.8 million barrels per day.

Global oil production is expected to average 100.7 million barrels per day in 2026, which is 5.7 million barrels below the previous year’s level.

Diesel shortage is particularly acute

In some countries, such as Hungary, there is a significant imbalance in available energy reserves. Strategic crude oil reserves remain plentiful, but diesel supplies are dwindling rapidly.

Data from the Hungarian Hydrocarbon Storage Association shows that gas oil stocks stood at 520,300 tons at the end of January. By the end of July and August, they had fallen to around 390,000 tons each month.

This significantly smaller diesel buffer is important for a country where more than 1.3 million cars are powered by diesel and where the entire regional market competes for the same scarce imports.

The effects are already being felt at the gas stations. Official and commercial price observers estimate the price of diesel in Hungary at the end of September at approximately 701 to 730 forints per litre, depending on the data series. At the end of June, it was still around 593 forints.

The initial concern in Budapest was not whether prices would rise, but how quickly a diesel price of 800 forints per litre would no longer seem like a distant scenario.

The speed of this development does not surprise central banks. Research by the Bank of Slovenia, based on euro area data between 2005 and 2026, showed that a 10 percent increase in the Brent crude price would, in the longer term, raise pre-tax diesel prices by about 6.5 percent and gasoline prices by around 6.2 percent.

A significant portion of the price increase reaches the petrol stations within the first two weeks – faster than would be expected based solely on the physical processes of transport, refining and wholesale.

The European Central Bank comes to a similar conclusion and points to an additional factor: refinery margins could further exacerbate the price shock.

During the price surge in the spring, Brent crude temporarily reached $138 per barrel, while diesel at the refinery gate climbed to $197. ECB staff later estimated that refining margins contributed about 41 euro cents per litre to the eurozone diesel price in mid-September. They told journalists that these margins might not peak until October.

Furthermore, prices rise faster than they subsequently fall.

Taxes, refining and transport costs, inventory levels, profit margins and local competition delay relief, even if the price of crude oil falls again.

That is precisely why governments are acting now – before higher fuel costs impact transport, food and services, further driving up general inflation.

A Europe-wide crisis

From Lisbon to Warsaw, governments face the same problem: protecting households and transport companies without simultaneously issuing a blank check for the consumption of fossil fuels.

Europe is not responding with a common solution, but with a patchwork of national measures.

Some governments are capping prices at gas stations. Others are lowering excise taxes – in some cases even below the minimum level stipulated by the European Union. A third group is focusing its aid on farmers, freight companies, and other large consumers. In contrast, some countries are allowing world market prices to reach consumers almost unchecked.

This can result in significantly different prices at the pump for the same barrel of oil across Europe.

Some examples:

• Austria has reduced the mineral oil tax by 1.9 euro cents per litre until the end of September.
• Belgium has introduced a government-imposed price cap.
• Croatia has lowered its diesel tax by a further 3 cents, bringing it 10 cents below the EU minimum. According to Zagreb, this means diesel now costs an average of €1.91 per litre instead of €2.26 without government intervention.
• Cyprus is offering a discount of 8.33 cents per litre until November 30th.
• Luxembourg will cover 5 cents of the petrol station price from July to December.
• Malta uses direct state aid to keep prices below the Eurozone average.
• On September 17, Portugal decided to redirect additional VAT revenue resulting from higher fuel prices into tax relief measures. These measures are expected to amount to approximately €1.3 billion by the end of the year.
• Slovenia set maximum prices of 1.748 euros for petrol and 2.012 euros for diesel for the week of September 22-28.
• Spain maintained its reduction of excise duty below the EU minimum level until September 30.
• Italy lowered and capped the diesel tax until the beginning of October.
• Montenegro and Serbia combine price caps with lower consumption taxes.

At the same time, targeted aid programs are running

Greece extended its diesel subsidy of 10 cents per litre until October and is simultaneously preparing an aid package for heating oil.

France is focusing its relief measures on agriculture, frequent drivers and the construction industry, instead of subsidizing fuel prices in general.

Ireland reimburses commercial freight forwarders and bus companies for part of their excise duty.

In addition to the general tax cut, Spain launched a €402 million aid program for transport companies.

Italy offers transport companies a tax credit for previously incurred additional costs.

Larger aid packages are still going through parliament.

Germany will reduce its energy tax by 14 cents per litre from October 1st until the end of the year. Taking into account the resulting reduction in VAT, the total tax relief should reach approximately 17 cents per litre. The entire package has a volume of approximately 2.5 billion euros.

Chancellor Friedrich Merz stated that motorists who rely on their vehicles daily are “reaching their limits”. Berlin is also in talks with the oil industry about a temporary price cap, similar to those in Luxembourg or Belgium. This could be introduced on January 1, 2027.

The Czech government plans to reintroduce a cap on petrol station margins from October 1st, reduce diesel tax to the EU minimum level and limit retail profit margins to 2.50 crowns per litre.

Poland is considering a 60 percent levy on additional profits of oil companies to finance price relief measures amounting to approximately 4 billion zlotys. However, the proposal faces parliamentary and constitutional hurdles.

The International Energy Agency now describes the reaction as a global phenomenon and no longer merely as a European crisis.

Within a few months, the number of countries with fuel subsidies rose from 16 to 38, while 57 countries, instead of the previous 40, have now reduced their energy taxes.

Based on IEA figures from mid-June, the Pew Research Centre concluded that 113 countries have taken at least one measure to combat rising energy costs since the start of the Iran-Iraq War. Taxes were modified in 55 countries, and 32 countries introduced fuel subsidies.

Ultimately, behind all these measures lies a problem that cannot be solved with tax cuts, subsidies, and price caps: Governments can treat the symptoms at the gas pump – but a finance ministry can neither reopen the Strait of Hormuz nor end the war in Ukraine.

 

yogaesoteric
October 1, 2026