ECB says refining margins are driving euro-area fuel inflation

Refining margins have become a significant driver of euro-area fuel inflation during the Middle East conflict, the European Central Bank says, as supply disruptions push up the cost of diesel and petrol even while oil-price assumptions have eased.

The ECB’s analysis says diesel refining margins in Europe surged to around three times their pre-conflict level. These margins measure the difference between the price of refined fuel and crude oil, and include production costs such as insurance, transport and labour, as well as a mark-up.

The bank says the conflict, which began on 28 February 2026, has strained supplies of crude oil and refined products. Global refinery activity has also been affected by reduced output in the Middle East, Russia and parts of Asia. At the end of September, EU seaborne imports were 56% lower for diesel and 52% lower for petrol than before the conflict, according to the ECB.

Higher refining margins have fed into consumer prices for liquid fuels used in transport and heating. The ECB says they have at times been almost as important to fuel-price inflation as changes in crude oil prices, particularly during energy crises.

The effect is visible in the bank’s inflation forecasts. Comparing assumptions used for its June and September 2026 projections, the ECB found that the later forecast produced higher energy inflation despite lower oil-price assumptions, largely because refining costs and margins had risen.

Refining margins have been volatile before: they fell during the Covid-19 pandemic, rose after Russia’s invasion of Ukraine and eased towards pre-pandemic levels in the second half of 2024. The ECB says the latest disruption may take longer to correct than earlier spikes, which historically tended to be short-lived.

Other parts of fuel prices have also shifted. Distribution costs and margins have remained above pre-pandemic levels, while cuts to excise duties in 2026 have been small compared with increases in crude oil prices and refining and distribution margins. The ECB says staff have used futures prices for refined petrol and diesel in projections since the start of the conflict to capture those movements in the inflation outlook.