Refining margins lift energy inflation despite lower oil assumptions
Higher refining costs and margins outweigh lower oil price assumptions in the European Central Bank's (ECB) September 2026 energy inflation forecast compared with June. Supply disruptions have raised refined fuel prices beyond the increase in crude oil.
Fuel shortages reach consumers
Brent exceeded $110 per barrel at end-October 2026, close to 60 percent above pre-conflict levels.
Europe's diesel refining margins reached around three times pre-Middle East conflict levels; petrol margins weakened in October after rising through September.
The Strait of Hormuz closure constrained Middle Eastern exports, Asian refiners faced costly crude substitutions and Ukrainian attacks reduced Russian capacity.
China curbed fuel exports from March, with temporary easing in July and August.
Russia extended petrol and diesel export bans through January 2027, with producer diesel restrictions partly eased from October 10 and ending October 31. EU seaborne diesel and petrol imports were respectively 56 and 52 percent below pre-conflict levels at end-September.
Margins outgrow their old range
Refining margins include production costs and mark-ups, not just profits.
Petrol and diesel margins were around $4 per barrel until 2003 and averaged around $10 during 2004-2021.
Since Russia's invasion of Ukraine, averages have reached $14 for petrol and $28 for diesel.
Distribution margins remain above pre-pandemic levels, while 2026 excise cuts offset little of the price increases.
Financial futures modestly improved fuel forecasts at 3-11 months across the full sample and one month ahead before 2020, but generally underpredicted prices during high inflation.
Crude alone misses the pressure
The model comparison uses May 21 and August 19 cut-offs for the June and September 2026 projections.
Higher refining costs and margins explain much of September's higher energy inflation forecast despite lower oil assumptions.
ECB and Eurosystem staff therefore track refined petrol and diesel futures alongside crude.