Since late February 2026 and the blockade of the Strait of Hormuz, fuel prices have been surging once again in Luxembourg. With a barrel of Brent crude hovering near $120, households facing hundreds of euros in additional annual costs, and the electric transition struggling to gain ground — an analysis of an oil crisis with far-reaching consequences.
The gloom is palpable as drivers reach for the fuel pump nozzle. Since February 28, the war in Iran and the blockade of the Strait of Hormuz have sent petrol and especially diesel prices soaring, even raising fears of shortages. After the war in Ukraine and the pandemic — both of which had already profoundly disrupted markets — consumers find themselves torn once again, unsure whether to brace for further increases or hold out for a drop.
Luxembourg’s fuel pricing system has the advantage of being transparent, and typically more favourable than in neighbouring countries. But the laws of the global market remain relentless: that relative advantage fades when international prices skyrocket. Since March, the Brent crude benchmark has been driving the trend. After plummeting to $20 during the Covid crisis, a barrel climbed back to $130 during the war in Ukraine, before reaching nearly $120 again in late March 2026 — still below the all-time high of $147.50 set in 2008.
Fuel prices: regulated, transparent and predictable
The Luxembourg government sets a maximum pump price, sharply limiting price differences between filling stations and the margins of retailers, who rely primarily on volume sales and ancillary products. There is no point comparing prices from one station to the next — they are virtually identical. In neighbouring France, by contrast, price disparities have at times triggered supply tensions and stock shortages.
Every day, the Ministry of the Economy monitors developments in the petroleum products market. The formula that determines pump prices takes into account, among other things, the quoted prices of various products — supplied by the Argus agency — and the day’s euro-to-dollar exchange rate. The calculation is carried out daily. If the price of a product has fluctuated compared with its level two days earlier, the new prices are communicated in the late afternoon to the relevant bodies and companies, as well as to the media. That is why, at 6 p.m., smartphone news alerts regularly announce the adjustments due to take effect at midnight. “It’s a transparent system that provides real predictability,” notes Paul Matzet (Deputy Director, DG Energy).
Consumer concerns
In Décryptage 55 by the IDEA Foundation, Frédéric Meys estimates that a 40-cent increase in diesel represents an additional annual cost of €674 for a peri-urban household with two cars — a far from negligible rise in the context of eroding purchasing power. He stresses that the current crisis primarily affects petroleum products, and has a much smaller impact on gas and even less on electricity. “It is mainly if this crisis persists that support measures will become necessary,” he notes, advocating for targeted intervention “to preserve a price signal that incentivises the transition.”
The Luxembourg government has not renewed the emergency measures adopted in 2022, pointing instead to the tripling of the energy bonus and investments in electrical infrastructure. Yet even Germany reduced its energy tax as early as mid-April to cushion the blow for consumers.
Carlo Thelen, Director General of the Chamber of Commerce, argues that “support measures may be justified for households that are most dependent on their vehicles, and especially for businesses with direct exposure, such as those in the transport and logistics sectors. However, across-the-board measures on pump prices would be costly and counterproductive: they would mechanically fuel pump tourism and benefit everyone indiscriminately.”
The knock-on effects should not be underestimated: petroleum prices influence the entire economy, as Georges Eischen, managing partner at La Provençale, points out. While the company is often associated with its fleet of trucks, energy actually represents just 1% of its turnover. “We absorbed the price increases without taking any specific measures. But what worries us most is that if the crisis drags on, people may have to cut their spending, and we could be affected indirectly.”
Is going green the answer?
Claude Simon, Head of Energy Sales at Enovos, strikes a reassuring note on electricity prices. Less dependent on Russian gas than in 2022 and bolstered by the growth of renewables, the electricity market enjoys greater stability. “Since we purchase a large share of our volumes up to three years in advance, we do not foresee any price adjustment before the end of the year at this stage. Private consumers can also secure their bills by opting for long-term fixed-rate contracts.”
In this context, the temptation to turn to cleaner mobility solutions seems logical. Economy Minister Lex Delles clearly encourages this shift. On the ground, however, momentum remains modest. Gerry Wagner, spokesperson for the House of Automobile, observes: “Yes, people are asking questions… but the fact remains that electric vehicles accounted for only 26% of new car purchases in March, and that ratio is not evolving significantly.” Half of those vehicles are company cars — a segment that is stagnating. “After the usual slowdown that follows the Autofestival, we’ll need to wait a little longer to see whether any paradigm shift materialises,” adds Gerry Wagner. Carlo Thelen insists: “The electrification of the vehicle fleet must therefore go hand in hand with an ambitious energy policy, ensuring decarbonised, available and competitively priced electricity.”
A windfall for the State
Rising fuel prices have a directly beneficial effect on public finances. On top of the base costs of the product — production, refining and transport — come fixed excise duties: approximately €0.56 per litre of petrol and €0.49 for diesel, including the carbon tax. The 17% VAT is then applied to the total, meaning that any increase in the pump price mechanically boosts tax revenue.
Even though volumes sold in Luxembourg have declined (from 2.2 billion litres in 2016 to 1.7 billion in 2024), revenues remain significant. In 2024, excise duties generated €300 million on petrol and €569 million on diesel. To that can be added between €550 and €650 million in VAT, along with €258 million from the carbon tax. In total, fuel accounts for roughly 6% of the Luxembourg state budget, which stands at close to €30 billion.
In this context, persistently high prices could paradoxically — yet logically — free up financial headroom to support the energy transition.
