Personal tools

next
previous
items

Skip to content. | Skip to navigation

Sound and independent information
on the environment

You are here: Home / Data and maps / Indicators / Fuel prices

Fuel prices

Topics: ,
Contents
 

Justification for indicator selection

An increase in fuel prices can result in a decrease in fuel demand, transport demand and GHG emissions, thereby leading to a decrease in pressures on the environment. Several different estimates on price elasticity of demand for fuel have been made. Goodwin et al. (2004), for example, estimate an elasticity of 0.6, i.e. a 10 % increase in fuel price would lead to a 6% decrease in fuel demand.

Fossil fuel consumption is directly linked to the emission of CO2 (a primary greenhouse gas). Links between fuel consumption and other pollutants (e.g. NOX, HC, PM, etc and noise) depend on the vehicle technology used (EURO standards and noise classes, type of engine and fuel needed) and trip conditions, as well as the type of fuel.

Fuel taxation, therefore, is a potential instrument for reducing emissions from transport. In particular, it represents the best charge structure for internalising climate change related externalities, as fuel consumption (factoring carbon content of fuel) is an excellent proxy for greenhouse gas emissions. The European Commission is aiming to achieve fair and efficient pricing of transport (European Commission, 2006), which implies that transport charges should aim to reflect the external costs of transport. However, to date fuel taxation is not generally used to internalise the environmental externalities of transport, possibly because high fuel tax is often politically unviable. The Phase I (from 2011 to 2016) stage of the European Commission’s transport White Paper strategy (2011) indicates that motor fuel taxation should be revised to take account of the energy and CO2 component. Some Member States do however reduce taxation on fuels that have low life-cycle emissions (see TERM26 Internalisation of External Costs).

Scientific references:

  • No rationale references available

Indicator definition

The price of fuel in the EU, including the cost price, excise duty and VAT. Prices are in Euros per litre.

Definitions:

  • ‘All petrol’ is a consumption-weighted average price of both leaded and unleaded fuel, corrected using energy-content to the equivalent amount of unleaded petrol.
  • ‘All fuel, unleaded petrol equivalent’ is a consumption-weighted average price of unleaded, leaded petrol and diesel, corrected using energy content to the equivalent amount of unleaded petrol.
  • ‘Nominal’ is the price with no adjustment for inflation.
  • ‘Real’ is the price corrected for inflation, using 2005 as the baseline year.
  • ‘Average, all fuel, unleaded petrol equivalent (real, weighted by consumption)’ is the consumption-weighted average of the ‘All fuel, unleaded petrol equivalent (real)’ line across the full time series.

Units

Fuel prices used include the cost price, excise duty and VAT. The units used are Euros per litre.

Policy context and targets

Context description

Fair and efficient transport pricing is a crucial precondition for sustainable transport. It implies that users pay for the full (environmental and social) costs of transport. Therefore price and tax level of fuel are important for three key reasons:

  • Fuel taxation is an instrument that serves different policy objectives; one possible use could be to internalise external costs. If prices and duties of transport (including fuel taxes) covered all social costs, the demand for transport would be economically optimal for the welfare of society as a whole, since prices would reflect all health, environmental and infrastructure costs. However, fuel taxes are not the only way towards fair pricing (see TERM22 Progress in Charge Levels for more fair pricing tools e.g. kilometre charging or vehicle regulation);
  • Higher fuel prices act as incentives to reduce fuel consumption, e.g. through purchase and use of more fuel efficient vehicles, a shift to non-motorised or public transport modes, fewer trips, and less motorised transport-orientated patterns of settlements; and
  • Differentiated fuel taxes can stimulate a shift towards cleaner fuels, for example from leaded towards unleaded petrol, to low-sulphur fuels or to biofuels. However, there can be unwanted side effects, e.g. the lower fuel tax on diesel, once introduced to support shippers, also fostered a shift from petrol to diesel passenger cars.

Fuel taxes are the subject of a variety of EU initiatives. The European transport White Paper (EC, 2001) proposed to "harmonise excise duty on diesel for commercial uses, which in practice would be higher than the current average tax on diesel". The aim of this harmonisation is to achieve better internalisation of external costs. Harmonisation also aims to improve the internal market by establishing level playing field for shippers from different EU Member States and create more stable prices in road transport. However, a 2002 Commission proposal to do so was rejected by the Council. The proposal resulted in decreases in excise duty incomes for several countries, up to 50 % in the UK. Also transport organisations argued against fuel tax revision. More recently in the European transport White Paper of 2011 (EC, 2011), the Commission has proposed to “revise motor fuel taxation with clear identification of the energy and CO2 component” by 2016.

EU minimum levels for road fuel taxes are set out in Council Directive 2003/96/EC on the taxation of energy products. As a result the minimum excise duty for unleaded petrol increased from 287 EUR per 1000 litres to 359 EUR per 1000 litres. For diesel fuel, the minimum rate increased from 245 EUR per 1000 litres to 302 EUR per 1000 litres. These rates are due to change in 2013. The Proposal for a Council Directive COM (2011) 169 sets out proposed taxes which are split into a component based on CO2 content and another based on energy content. A single minimum rate for CO2 emissions of 20 EUR per tonne CO2 is proposed for all sectors not covered by the EU ETS. The other component of the minimum taxation rate is based on energy content, set at 9.6 EUR per GJ for motor fuels. The revisions are timed to coincide with the goals for 2020 set out in the Climate and Energy Package, and to complement the third phase of the EU ETS (2013-2020). The objective is to remove artificial barriers to energy transition such as fuel subsidies and the fact that some Member States obtain significant revenue from taxation on fossil fuels.

The EC’s ‘Europe 2020’ strategy (EC, 2010) includes a positive approach to energy taxes and greening transport: “where taxes may have to rise, this should, where possible, be done in conjunction with making the tax systems more ‘growth-friendly’. For example, raising taxes on labour, as has occurred in the past at great costs to jobs, should be avoided. Rather Member States should seek to shift the tax burden from labour to energy and environmental taxes as part of ‘greening’ of taxation systems”.

Targets

The 2011 Transport White Paper suggests that EU motor fuel taxation should be restructured, to clearly identify the energy and CO2 components. In 2011, a proposal (COM/2011/169) for a revised Energy Taxation Directive called for the introduction of a CO2 element into energy taxation, to bring energy taxation in line with the EU’s climate change commitments, and for linking the level of the tax to the energy content of fuels (including those used in aviation), so as to create an incentive across all sectors for increased energy. This is a particular issue for diesel, where freight vehicles travel further to buy fuel in countries where the fuel tax is lowest (fuel tourism). This proposal is still under discussion.

Related policy documents

  • COM (2001) 370 final. European transport policy for 2010.
    WHITE PAPER European transport policy for 2010: time to decideCOM (2001) 370 final
  • COM(2006) 314
    'Keep Europe Moving – Sustainable mobility for our continent'. Mid-term review of the Transport White Paper, published in 2001 by the European Commission: Communication from the Commission to the Council and the European Parliament of 22 June 2006. COM (2006) 314 final
  • COM(2007) 52
    ‘Proposal for a council directive amending Directive 2003/96/EC as regards to the adjustment of special tax arrangements for gas oil used as motor fuel for commercial purposes and the coordination of taxation of unleaded petrol and gas oil used as motor fuel
  • COM(2010) 2020, Europe 2020: A strategy for smart, sustainable and inclusive growth
    European Commission, 2010. Europe 2020: A strategy for smart, sustainable and inclusive growth. COM(2010) 2020. 
  • Council Directive 2003/96/EC
    Restructuring the Community framework for the taxation of energy products and electricity. EU, 2003.
  • Transport White paper 2011
    Roadmap to a Single European Transport Area - Towards a competitive and resource efficient transport system

Methodology

Methodology for indicator calculation

Fuel prices and taxes are presented weekly in a DG TREN Oil Bulletin (prior to 2006, data was also presented in a monthly format). Information is available for each of the EU Member States (including EU10 from mid-2004 and for Bulgaria and Romania as of January 2008). Fuel prices are corrected for inflation using the Harmonised Indices of Consumer Prices for each MS. Prices are then weighted by fuel consumption to calculate an EU-25 average. 

As leaded petrol was replaced by unleaded petrol during the period studied, an unleaded equivalent price has been calculated, which is a consumption weighted average, corrected for the slightly different energy content of the two fuels.

Methodology for gap filling

No methodology for gap filling has been specified.

Methodology references

No methodology references available.

Data specifications

EEA data references

  • No datasets have been specified here.

External data references

Data sources in latest figures

Uncertainties

Methodology uncertainty

There is little uncertainty in the methodology used. However, information on annual fuel consumption is not currently available. 

Prior to 2006, quarterly data were used, i.e. 15/01, 15/04, 15/07, and 15/10. After 2006, weekly data are published. HICP is only available in monthly data, so the same HICP is used for every fuel price data point in each month. Consumption data are available in yearly resolution, so calculations for the weighted average price by consumption uses the same consumption data for every week in a given year.

Data sets uncertainty

The fuel prices and taxes information is considered to be a reliable data set.

Rationale uncertainty

No uncertainty has been specified

Further work

Short term work

Work specified here requires to be completed within 1 year from now.

Long term work

Work specified here will require more than 1 year (from now) to be completed.

Work description

Further work related to fuel prices and taxes could include gathering information and data on other transport fuels, such as jet fuel, marine fuels, rail diesel and electricity taxes, or even alternative fuels such as biofuels, LPG and natural gas (CNG, LPG).  However, in most cases this information is not collected centrally by bodies such as Eurostat and can be difficult to obtain from other sources.

Resource needs

No resource needs have been specified

Status

In progress

Deadline

2015/12/31 00:00:00 GMT+1

General metadata

Responsibility and ownership

EEA Contact Info

Cinzia Pastorello

Ownership

European Environment Agency (EEA)

Identification

Indicator code
TERM 021
Specification
Version id: 1
Primary theme: Transport Transport

Permalinks

Permalink to this version
a2df0bc0d812f8daa61b0c39f561991b
Permalink to latest version
RE6RY78D55

Frequency of updates

Updates are scheduled once per year in October-December (Q4)

Classification

DPSIR: Driving force
Typology: Descriptive indicator (Type A - What is happening to the environment and to humans?)

Related content

Data references used

Latest figures and vizualizations

Relevant policy documents

Geographic coverage

Comments

Subscriptions
Sign up to receive our reports (print and/or electronic) and quarterly e-newsletter.
Follow us
 
 
 
 
 
Log in


Forgot your password?
European Environment Agency (EEA)
Kongens Nytorv 6
1050 Copenhagen K
Denmark
Phone: +45 3336 7100