European governments are rushing to limit the impact of a new energy shock, which analysts themselves are now struggling to forecast, as Brent crude remains near $100 per barrel and diesel prices rise across Europe. The international oil market has remained expensive for months. What has changed, however, is the certainty of even those who are paid to explain market developments. JPMorgan informed its clients on September 17 that, for the first time since hostilities surrounding Iran began about seven months earlier, its commodity analysts no longer have a baseline scenario for how the market disruption will end. "We simply do not know how to model the end of the crisis," written by the bank's analysts after crossing several financial boundaries they believed could lead to a diplomatic de-escalation, including an oil price above $100 a barrel. JPMorgan estimated that a Brent price near $90 would be compatible with September's supply and demand data. However, futures contracts traded around $100 and higher as traders price in the risk of new supply losses, the magnitude of which no one can yet calculate. By Monday, spot Brent was still moving near $99 a barrel.
Reserves cannot absorb the shock
Oil reserves offer little protection against price increases. The U.S. Energy Information Administration has warned that prices are expected to remain elevated until Middle East oil trade is restored and reserves can be replenished. The International Energy Agency (IEA), in its September report, captured the extent of inventory depletion even more sharply. Global inventories fell by an additional 95 million barrels in August, bringing the total decline since February to 507 million barrels, or about 2.8 million barrels per day. Global oil supply is now projected to average 100.7 million barrels per day in 2026, down by 5.7 million barrels per day compared to a year earlier.
A nightmarish situation with diesel
In some countries, such as Hungary, the problem is even more severe due to a large imbalance between available energy reserves. Strategic crude oil reserves remain at relatively adequate levels, but diesel stocks are depleting rapidly. According to data from the Hungarian Hydrocarbon Stockpiling Association, gas oil reserves stood at 520.3 thousand tons at the end of January, but dropped to around 390 thousand tons at both the end of July and August. The smaller diesel cushion takes on particular importance for a country where more than 1.3 million passenger cars run on this fuel, while the regional market competes for the same limited imports.
Pump prices are skyrocketing
The increases have already hit the pumps. Official and commercial indicators place the price of diesel in Hungary at around 701 Hungarian forints per liter in late September, according to some official datasets, and close to 730 forints based on daily station averages. These levels are significantly higher than the approximately 593 forints recorded at the end of June. Initial concern in Budapest was not whether retail prices would increase, but how quickly 800 forints would cease to be considered a distant upper limit.
Why oil passes so quickly to the pump
The speed of price transmission comes as no surprise to central bankers. Research by the Bank of Slovenia, covering Eurozone data from 2005 to 2026, found that a 10% increase in the Brent price leads long-term to an approximate 6.5% increase in pre-tax diesel prices and 6.2% in petrol prices. A significant portion of the increase appears at gas stations within the first two weeks, faster than expected based on the physical transport, refining, and wholesale distribution cycle. The ECB has reached a similar conclusion, adding another worrisome factor: refining margins can further amplify the shock. During the spring surge, Brent temporarily reached $138 per barrel, while the price of diesel at the refinery gate spiked to $197. Later, ECB staff estimated that refinery margins contributed about 41 euro cents per liter to the retail price of diesel in the Eurozone in mid-September. In fact, ECB officials warned that diesel margins may not peak until October.
Prices rise fast, but fall slowly
Price drops are usually much slower than price hikes. Taxes, refining costs, shipping, inventories, profit margins, and local competition delay relief for consumers even when crude prices begin to fall. This asymmetry explains why governments are rushing to take action before higher fuel bills cascade into transport, food, and services, driving up overall inflation.
A Pan-European energy problem – Patchwork measures instead of a unified solution
The dilemma is common from Lisbon to Warsaw: how to protect households and transport companies without giving a blank check to fossil fuel consumption. Europe has responded with a patchwork of different measures rather than a single unified policy. Some governments are imposing caps on retail prices. Others are cutting excise duties, in some cases below the European Union minimum threshold. A third group targets financial aid to farmers, hauliers, and other large fuel consumers. Finally, some countries still allow international prices to pass almost directly to consumers. The result is that the same barrel of oil can lead to completely different pump prices from country to country.
What European countries are doing
Austria: implementing a fuel tax cut of 1.9 euro cents per liter until the end of September.
Belgium: has imposed an official cap on retail prices.
Croatia: again reduced the excise duty on diesel by 3 cents, setting it 10 cents below the EU minimum. The government reports that the average price of diesel stands at €1.91 per liter, compared to €2.26 without the state intervention.
Cyprus: offering a discount of 8.33 cents per liter until November 30.
Luxembourg: absorbing 5 cents of the pump price from July to December.
Malta: using direct state aid to keep prices below the Eurozone average.
Portugal: decided on September 17 to return excess VAT revenue generated by higher fuel prices through tax relief worth about €1.3 billion by year-end.
Slovenia: set price caps of €1.748 for petrol and €2.012 for diesel for the week of September 22–28.
Spain: maintaining reduced excise duty below the EU minimum until September 30.
Italy: reduced and capped the diesel excise tax until early October.
Montenegro and Serbia: combining caps on retail prices with reduced excise duties.
Targeted support for farmers and hauliers
Alongside general measures, several countries are applying targeted interventions.
Greece: extended the diesel subsidy by 10 euro cents per liter through October and is preparing a support package for heating oil.
France: directing support to agriculture, long-distance workers, and the construction sector instead of a horizontal tax cut.
Ireland: refunding part of the excise duty to commercial hauliers and bus companies.
Spain: added a €402 million scheme for truck drivers, on top of general tax reductions.
Italy: offering transport companies a tax credit for incurred cost increases.
Germany: Tax reduction of 14 cents per liter
Larger measure packages are still being drafted and working their way through parliaments. Germany will cut its energy tax by 14 euro cents per liter from October 1 until the end of the year. Including the lower VAT burden, the total impact reaches about 17 cents per liter as part of a €2.5 billion package. Chancellor Friedrich Merz stated that commuters who depend daily on their cars are "reaching their limits." At the same time, Berlin is in talks with the oil industry for a temporary price cap, modeled on Luxembourg or Belgium, aiming for implementation starting January 1, 2027.
What the Czech Republic and Poland are doing
The Czech government will reintroduce a cap on gas station profit margins starting October 1, reduce the excise duty on diesel to the minimum allowable EU level, and restrict retail margins to 2.50 korunas per liter. Poland has considered a 60% tax on the windfall profits of oil companies to fund consumer relief measures worth roughly 4 billion zlotys. However, the plan faces parliamentary and constitutional hurdles.
The crisis is now global
The International Energy Agency has characterized the government response as global rather than exclusively European. In just a few months, the number of countries implementing fuel subsidies rose from 16 to 38, while countries adopting energy tax cuts grew from 40 to 57. The Pew Research Center, drawing on IEA data through mid-June, recorded 113 countries that had taken at least one action to address energy costs following the war with Iran. Among these, 55 countries made tax adjustments and 32 introduced fuel subsidies. The numbers capture the deadlock governments face: they are trying to tackle the problem at the pump, as they cannot reopen the Strait of Hormuz from a Ministry of Finance, nor end the war in Ukraine. The result is a European energy landscape filled with temporary measures, subsidies, tax breaks, and price caps, while the root cause of the energy crisis remains beyond the direct control of governments.
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