Almost all European countries have liberalized fuel markets (fuel market policies). Suppliers are free to trade across borders and set diesel prices based on market conditions, with minimal government intervention. As a result, diesel prices maintain a stable and well-established relationship with crude oil prices and the U.S. dollar exchange rates. Hence, in our statistical estimations using historical data, changes in crude oil prices, exchange rates, and seasonal factors explain over 90% of the variation in retail diesel prices across Europe. This means that diesel prices can be predicted with a high degree of accuracy under different oil price scenarios.

Our Latest EU Diesel Price Forecast

On the chart is our latest diesel price forecast for the European Union from October 2025. This is a weighted average of the country level diesel prices for the EU countries using their GDP as weights. There are three scenarios. The medium is based on the current market consensus about oil price levels moving forward. The high scenario is consistent with rapidly growing global economy and shocks to energy markets from geopolitical tensions. The low scenario is based on a significant slowdown in global economic growth. The range defined by the two scenarios is between 1.55 euro per liter and 1.09 euro per liter.



Diesel price forecast service: each month we generate diesel price forecast for the EU and many other countries around the world.

Differential Impact Across East and West Europe

The impact of crude oil price changes on retail diesel prices varies among European countries. This variation is mainly due to differences in taxation. In countries with high excise taxes on diesel, the effect of oil price fluctuations on retail prices is smaller because excise taxes are fixed amounts per liter and do not change with wholesale diesel prices. Thus, the higher the excise tax, the larger the portion of the retail price that remains constant. Generally, excise taxes are lower in Eastern Europe than in Western Europe and, therefore, oil price changes have a larger impact in the east, leading to lower but more volatile diesel prices compared to the West. Such differences are important in setting up forecasting models. See the latest diesel prices in Europe.

The Role of the Euro-Dollar exchange rate

The effect of U.S. dollar exchange rate movements on retail diesel prices is almost identical to that of crude oil price changes. Because crude oil is traded in U.S. dollars, an appreciation of the dollar makes oil more expensive in local currencies, while depreciation makes it cheaper. A 10% increase in oil prices or a 10% appreciation of the dollar has roughly the same effect on local fuel prices. However, crude oil prices are far more volatile than exchange rates, and specifically against the euro. Then, in practical terms, crude oil prices remain the dominant factor influencing diesel prices.

Seasonality and Inflation

Two additional factors influence diesel prices: seasonality and inflation. Diesel demand rises during winter months in the Northern Hemisphere because heating oil - its close substitute - is used for heating. Therefore, diesel prices tend to be lower during summer. Inflation also plays a role by increasing marketing, transport, and labor costs. Although inflation has typically been moderate in Europe, recent inflationary periods have raised fuel distribution costs and slightly pushed up diesel prices.

Carbon Permit Trading

A unique European development is the planned emissions permit trading system for diesel fuel, expected to start in 2027, a policy known as EU ETS 2. Using diesel for transport will require emission permits. As the price of these permits increases over time, this policy could exert additional upward pressure on diesel prices.

Within-Country Regional Variation

Diesel prices within individual European countries are highly uniform due to consistent taxation and well-functioning competitive markets. Regional price differences rarely exceed 5%, making national averages reliable indicators. Prices also adjust rapidly to changes in crude oil markets. Most of the effect is felt within two weeks, and the adjustment is largely complete within about a month.

Occasional Government Intervention

Despite liberalized markets, European governments sometimes intervene during major oil price shocks. This occurred in 2022 after the start of the war in Ukraine. Several governments temporarily reduced fuel taxes or pressured major suppliers to limit price increases. These interventions often persisted for years after the initial shock had passed. Another key policy was the ban on diesel imports from Russia. While there were fears of diesel shortages, markets quickly adjusted by sourcing supply from other regions, including India, Africa, and the United States. As a result, the impact on prices was short-lived and relatively modest which underscores the ability of well-functioning liberalized markets to absorb shocks.

Tax Policy Changes

Although most markets in Europe are liberalized and the impact of crude oil prices on diesel prices is therefore predictable, significant tax changes can still influence that relationship. In recent years, for example, Sweden has lowered its diesel taxes to support local businesses and households, while Lithuania has raised its diesel taxes to finance higher defense spending. These are just two examples, but such tax policy changes are not uncommon in Europe. This means that forecasting models for diesel prices must be continuously recalibrated to account for the effects of these adjustments.