Gasoline and diesel price forecast - outlook for Europe and the world

This brief article explains how one can reach an informed guess about the future trajectory of fuel prices. To understand fuel price changes, one needs to know the relationship between crude oil prices and fuel prices in a particular country as crude oil prices are the main driver of retail fuel prices. Exchange rates, regional supply disruptions, seasonal factors, and taxes also play a role but these influences are relatively minor compared to the effect of crude oil. The reason is that oil prices are highly volatile. They can decline in half or double within short periods of time pulling down or up the retail fuel prices.

So, to form an estimate of the future level of fuel prices, you need to know two things:

1. The expected future oil prices. Those you can obtain following our guide on oil price forecasts.

2. The relationship between fuel prices and crude oil prices. Based on our estimations, every 10 percent change in oil prices leads to about 3 percent change in fuel prices in Europe and about 7 percent change in the U.S. In principle, the higher the fuel excise taxes, the smaller the change in fuel prices for a given change in oil prices. These numbers are the same for gasoline and diesel.

If you are in a country with high fuel prices (see the global rankings for gasoline and diesel) an increase/decrease in oil prices from, say, 60 to 70 USD per barrel would lead to about 5 percent increase/decrease in fuel prices. If you are in a country with about average fuel prices, the change would be double - about 10 percent. If you are in a country with low fuel prices, that usually means that the government regulates or subsidizes prices. Then, oil prices have a less direct impact on fuel prices but eventually policies adjust and fuel prices come in line with the crude oil prices.

Based on these observations and the latest oil price outlook, you can compute a reasonable estimate of the expected future fuel prices. If you need a more precise forecast for particular countries, you can follow this forecast methodology.

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